Correlation Between Air Transport and COSTCO WHOLESALE

Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Air Transport and COSTCO WHOLESALE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Transport Services and COSTCO WHOLESALE CDR, you can compare the effects of market volatilities on Air Transport 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 Air Transport with a short position of COSTCO WHOLESALE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and COSTCO WHOLESALE.

Diversification Opportunities for Air Transport and COSTCO WHOLESALE

0.65

Correlation Coefficient

Air Transport  COSTCO WHOLESALE

Poor diversification

The 3 months correlation between Air and COSTCO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services 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 Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and COSTCO WHOLESALE go up and down completely randomly.

Pair Corralation between Air Transport and COSTCO WHOLESALE

Assuming the 90 days horizon Air Transport Services is expected to generate 0.3 times more return on investment than COSTCO WHOLESALE. However, Air Transport Services is 3.28 times less risky than COSTCO WHOLESALE. It trades about -0.05 of its potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about -0.04 per unit of risk. If you would invest  2,100  in Air Transport Services on December 28, 2024 and sell it today you would lose (40.00) from holding Air Transport Services or give up 1.9% of portfolio value over 90 days.

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

Air Transport Services  vs.  COSTCO WHOLESALE CDR

Air Transport Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Transport Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Air Transport is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days COSTCO WHOLESALE CDR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, COSTCO WHOLESALE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Transport and COSTCO WHOLESALE

The main advantage of trading using opposite Air Transport and COSTCO WHOLESALE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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 Air Transport Services 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 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.