Correlation Between Andlauer Healthcare and Costco Wholesale

Can any of the company-specific risk be diversified away by investing in both Andlauer Healthcare 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 Andlauer Healthcare and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Andlauer Healthcare Gr and Costco Wholesale Corp, you can compare the effects of market volatilities on Andlauer Healthcare 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 Andlauer Healthcare with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Andlauer Healthcare and Costco Wholesale.

Diversification Opportunities for Andlauer Healthcare and Costco Wholesale

0.4

Correlation Coefficient

Andlauer Healthcare  Costco Wholesale

Very weak diversification

The 3 months correlation between Andlauer and Costco is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Andlauer Healthcare Gr and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp and Andlauer Healthcare 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 Andlauer Healthcare Gr 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 Corp has no effect on the direction of Andlauer Healthcare i.e., Andlauer Healthcare and Costco Wholesale go up and down completely randomly.

Pair Corralation between Andlauer Healthcare and Costco Wholesale

Assuming the 90 days trading horizon Andlauer Healthcare Gr is expected to under-perform the Costco Wholesale. But the stock apears to be less risky and, when comparing its historical volatility, Andlauer Healthcare Gr is 1.07 times less risky than Costco Wholesale. The stock trades about -0.11 of its potential returns per unit of risk. The Costco Wholesale Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,397  in Costco Wholesale Corp on December 23, 2024 and sell it today you would lose (214.00) from holding Costco Wholesale Corp or give up 4.87% of portfolio value over 90 days.

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

Andlauer Healthcare Gr  vs.  Costco Wholesale Corp

Andlauer Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Andlauer Healthcare Gr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Costco Wholesale Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Costco Wholesale is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Andlauer Healthcare and Costco Wholesale

The main advantage of trading using opposite Andlauer Healthcare and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Andlauer Healthcare 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 Andlauer Healthcare Gr and Costco Wholesale Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.