Correlation Between Costco Wholesale and Adobe

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

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

Diversification Opportunities for Costco Wholesale and Adobe

0.36

Correlation Coefficient

Costco Wholesale  Adobe

Weak diversification

The 3 months correlation between Costco and Adobe is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc and Costco Wholesale 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 Costco Wholesale are associated (or correlated) with Adobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Inc has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Adobe go up and down completely randomly.

Pair Corralation between Costco Wholesale and Adobe

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.63 times more return on investment than Adobe. However, Costco Wholesale is 1.59 times less risky than Adobe. It trades about 0.11 of its potential returns per unit of risk. Adobe Inc is currently generating about -0.03 per unit of risk. If you would invest  1,548,238  in Costco Wholesale on September 29, 2024 and sell it today you would earn a total of  342,428  from holding Costco Wholesale or generate 22.12% return on investment over 90 days.

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

Costco Wholesale  vs.  Adobe Inc

Costco Wholesale

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Adobe Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Costco Wholesale and Adobe

The main advantage of trading using opposite Costco Wholesale and Adobe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Adobe 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 Adobe will offset losses from the drop in Adobe's long position.

The idea behind Costco Wholesale and Adobe Inc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.