Correlation Between Costco Wholesale and Brookfield

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

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

Diversification Opportunities for Costco Wholesale and Brookfield

-0.42

Correlation Coefficient

Costco Wholesale  Brookfield

Very good diversification

The 3 months correlation between Costco and Brookfield is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield 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 Corp are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Brookfield go up and down completely randomly.

Pair Corralation between Costco Wholesale and Brookfield

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 1.41 times more return on investment than Brookfield. However, Costco Wholesale is 1.41 times more volatile than Brookfield. It trades about 0.07 of its potential returns per unit of risk. Brookfield is currently generating about 0.02 per unit of risk. If you would invest  4,128  in Costco Wholesale Corp on October 11, 2024 and sell it today you would earn a total of  162.00  from holding Costco Wholesale Corp or generate 3.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Costco Wholesale Corp  vs.  Brookfield

Costco Wholesale Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Costco Wholesale is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Brookfield

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Brookfield is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Costco Wholesale and Brookfield

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

The idea behind Costco Wholesale Corp and Brookfield 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.