Correlation Between Costco Wholesale and Morgan Stanley

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

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

Diversification Opportunities for Costco Wholesale and Morgan Stanley

0.55

Correlation Coefficient

Costco Wholesale  Morgan Stanley

Very weak diversification

The 3 months correlation between Costco and Morgan is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Morgan Stanley go up and down completely randomly.

Pair Corralation between Costco Wholesale and Morgan Stanley

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.94 times more return on investment than Morgan Stanley. However, Costco Wholesale is 1.06 times less risky than Morgan Stanley. It trades about 0.09 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.03 per unit of risk. If you would invest  1,995,943  in Costco Wholesale on December 4, 2024 and sell it today you would earn a total of  154,057  from holding Costco Wholesale or generate 7.72% return on investment over 90 days.

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

Costco Wholesale  vs.  Morgan Stanley

Costco Wholesale

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 6 (%) 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 April 2025.

Morgan Stanley

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Morgan Stanley is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Costco Wholesale and Morgan Stanley

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

The idea behind Costco Wholesale and Morgan Stanley 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.