Correlation Between Costco Wholesale and Goodfood Market

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

Diversification Opportunities for Costco Wholesale and Goodfood Market

0.79

Correlation Coefficient

Costco Wholesale  Goodfood Market

Poor diversification

The 3 months correlation between Costco and Goodfood is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Goodfood Market Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodfood Market Corp 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 Goodfood Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodfood Market Corp has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Goodfood Market go up and down completely randomly.

Pair Corralation between Costco Wholesale and Goodfood Market

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 8.87 times less return on investment than Goodfood Market. But when comparing it to its historical volatility, Costco Wholesale Corp is 4.57 times less risky than Goodfood Market. It trades about 0.09 of its potential returns per unit of risk. Goodfood Market Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Goodfood Market Corp on September 24, 2024 and sell it today you would earn a total of  16.00  from holding Goodfood Market Corp or generate 57.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Costco Wholesale Corp  vs.  Goodfood Market Corp

Costco Wholesale Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 6 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Goodfood Market Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goodfood Market Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Goodfood Market displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and Goodfood Market

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

The idea behind Costco Wholesale Corp and Goodfood Market Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.