Correlation Between Costco Wholesale and Dexterra

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

Diversification Opportunities for Costco Wholesale and Dexterra

0.82

Correlation Coefficient

Costco Wholesale  Dexterra

Very poor diversification

The 3 months correlation between Costco and Dexterra is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Dexterra Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dexterra Group 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 Dexterra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dexterra Group has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Dexterra go up and down completely randomly.

Pair Corralation between Costco Wholesale and Dexterra

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.99 times less return on investment than Dexterra. But when comparing it to its historical volatility, Costco Wholesale Corp is 1.42 times less risky than Dexterra. It trades about 0.39 of its potential returns per unit of risk. Dexterra Group is currently generating about 0.55 of returns per unit of risk over similar time horizon. If you would invest  653.00  in Dexterra Group on September 17, 2024 and sell it today you would earn a total of  100.00  from holding Dexterra Group or generate 15.31% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Dexterra Group

Costco Wholesale Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dexterra Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dexterra Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dexterra may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Costco Wholesale and Dexterra

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

The idea behind Costco Wholesale Corp and Dexterra Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.