Correlation Between Costco Wholesale and Grupo KUO

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

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

Diversification Opportunities for Costco Wholesale and Grupo KUO

0.21

Correlation Coefficient

Costco Wholesale  Grupo KUO

Modest diversification

The 3 months correlation between Costco and Grupo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Grupo KUO SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo KUO SAB 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 Grupo KUO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo KUO SAB has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Grupo KUO go up and down completely randomly.

Pair Corralation between Costco Wholesale and Grupo KUO

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.04 times less return on investment than Grupo KUO. But when comparing it to its historical volatility, Costco Wholesale is 1.64 times less risky than Grupo KUO. It trades about 0.1 of its potential returns per unit of risk. Grupo KUO SAB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,260  in Grupo KUO SAB on September 29, 2024 and sell it today you would earn a total of  340.00  from holding Grupo KUO SAB or generate 7.98% 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.  Grupo KUO SAB

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.

Grupo KUO SAB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo KUO SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Grupo KUO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Costco Wholesale and Grupo KUO

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

The idea behind Costco Wholesale and Grupo KUO SAB 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.