Correlation Between Costco Wholesale and CCL Industries

Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and CCL Industries 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 CCL Industries 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 CCL Industries, you can compare the effects of market volatilities on Costco Wholesale and CCL Industries 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 CCL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and CCL Industries.

Diversification Opportunities for Costco Wholesale and CCL Industries

-0.65

Correlation Coefficient

Costco Wholesale  CCL Industries

Excellent diversification

The 3 months correlation between Costco and CCL is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and CCL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCL Industries 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 CCL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCL Industries has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and CCL Industries go up and down completely randomly.

Pair Corralation between Costco Wholesale and CCL Industries

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.95 times more return on investment than CCL Industries. However, Costco Wholesale Corp is 1.06 times less risky than CCL Industries. It trades about 0.06 of its potential returns per unit of risk. CCL Industries is currently generating about -0.23 per unit of risk. If you would invest  4,131  in Costco Wholesale Corp on October 6, 2024 and sell it today you would earn a total of  112.00  from holding Costco Wholesale Corp or generate 2.71% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  CCL Industries

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

CCL Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CCL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Costco Wholesale and CCL Industries

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

The idea behind Costco Wholesale Corp and CCL Industries 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.