Correlation Between Costco Wholesale and Ameriprise Financial

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

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

Diversification Opportunities for Costco Wholesale and Ameriprise Financial

0.82

Correlation Coefficient

Costco Wholesale  Ameriprise Financial

Very poor diversification

The 3 months correlation between Costco and Ameriprise is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Costco Wholesale and Ameriprise Financial

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.88 times less return on investment than Ameriprise Financial. But when comparing it to its historical volatility, Costco Wholesale is 2.3 times less risky than Ameriprise Financial. It trades about 0.18 of its potential returns per unit of risk. Ameriprise Financial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  844,750  in Ameriprise Financial on September 17, 2024 and sell it today you would earn a total of  255,727  from holding Ameriprise Financial or generate 30.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Costco Wholesale  vs.  Ameriprise Financial

Costco Wholesale

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Costco Wholesale showed solid returns over the last few months and may actually be approaching a breakup point.

Ameriprise Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ameriprise Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and Ameriprise Financial

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

The idea behind Costco Wholesale and Ameriprise Financial 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.