Correlation Between Alfa Financial and COSTCO WHOLESALE

Can any of the company-specific risk be diversified away by investing in both Alfa Financial and COSTCO WHOLESALE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alfa Financial and COSTCO WHOLESALE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alfa Financial Software and COSTCO WHOLESALE CDR, you can compare the effects of market volatilities on Alfa Financial and COSTCO WHOLESALE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alfa Financial with a short position of COSTCO WHOLESALE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and COSTCO WHOLESALE.

Diversification Opportunities for Alfa Financial and COSTCO WHOLESALE

0.61

Correlation Coefficient

Alfa Financial  COSTCO WHOLESALE

Poor diversification

The 3 months correlation between Alfa and COSTCO is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and COSTCO WHOLESALE CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTCO WHOLESALE CDR and Alfa Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alfa Financial Software are associated (or correlated) with COSTCO WHOLESALE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSTCO WHOLESALE CDR has no effect on the direction of Alfa Financial i.e., Alfa Financial and COSTCO WHOLESALE go up and down completely randomly.

Pair Corralation between Alfa Financial and COSTCO WHOLESALE

Assuming the 90 days trading horizon Alfa Financial is expected to generate 1.27 times less return on investment than COSTCO WHOLESALE. In addition to that, Alfa Financial is 1.16 times more volatile than COSTCO WHOLESALE CDR. It trades about 0.1 of its total potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about 0.14 per unit of volatility. If you would invest  1,694  in COSTCO WHOLESALE CDR on September 15, 2024 and sell it today you would earn a total of  1,406  from holding COSTCO WHOLESALE CDR or generate 83.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alfa Financial Software  vs.  COSTCO WHOLESALE CDR

Alfa Financial Software

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COSTCO WHOLESALE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alfa Financial and COSTCO WHOLESALE

The main advantage of trading using opposite Alfa Financial and COSTCO WHOLESALE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial position performs unexpectedly, COSTCO WHOLESALE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in COSTCO WHOLESALE will offset losses from the drop in COSTCO WHOLESALE's long position.

The idea behind Alfa Financial Software and COSTCO WHOLESALE CDR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.