Correlation Between Canadian General and Costco Wholesale

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

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

Diversification Opportunities for Canadian General and Costco Wholesale

0.84

Correlation Coefficient

Canadian General  Costco Wholesale

Very poor diversification

The 3 months correlation between Canadian and Costco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments 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 Canadian General 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 Canadian General Investments 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 Canadian General i.e., Canadian General and Costco Wholesale go up and down completely randomly.

Pair Corralation between Canadian General and Costco Wholesale

Assuming the 90 days trading horizon Canadian General is expected to generate 15.33 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, Canadian General Investments is 14.47 times less risky than Costco Wholesale. It trades about 0.04 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  45,494  in Costco Wholesale Corp on October 10, 2024 and sell it today you would earn a total of  46,812  from holding Costco Wholesale Corp or generate 102.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Canadian General Investments  vs.  Costco Wholesale Corp

Canadian General Inv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian General Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Canadian General may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Costco Wholesale Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Costco Wholesale is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Canadian General and Costco Wholesale

The main advantage of trading using opposite Canadian General and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian General 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 Canadian General Investments 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.