Correlation Between Costco Wholesale and Ternium SA

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

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

Diversification Opportunities for Costco Wholesale and Ternium SA

-0.34

Correlation Coefficient

Costco Wholesale  Ternium SA

Very good diversification

The 3 months correlation between Costco and Ternium is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Ternium SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA 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 Ternium SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ternium SA has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Ternium SA go up and down completely randomly.

Pair Corralation between Costco Wholesale and Ternium SA

Assuming the 90 days trading horizon Costco Wholesale is expected to under-perform the Ternium SA. In addition to that, Costco Wholesale is 1.59 times more volatile than Ternium SA. It trades about -0.03 of its total potential returns per unit of risk. Ternium SA is currently generating about 0.12 per unit of volatility. If you would invest  59,500  in Ternium SA on December 22, 2024 and sell it today you would earn a total of  5,070  from holding Ternium SA or generate 8.52% return on investment over 90 days.

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

Costco Wholesale  vs.  Ternium SA

Costco Wholesale

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Costco Wholesale is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ternium SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ternium SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Ternium SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Costco Wholesale and Ternium SA

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

The idea behind Costco Wholesale and Ternium SA 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.

Check out your portfolio center.

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.