Correlation Between Costco Wholesale and InsuraGuest Technologies

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

Diversification Opportunities for Costco Wholesale and InsuraGuest Technologies

-0.41

Correlation Coefficient

Costco Wholesale  InsuraGuest Technologies

Very good diversification

The 3 months correlation between Costco and InsuraGuest is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and InsuraGuest Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InsuraGuest Technologies 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 InsuraGuest Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InsuraGuest Technologies has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and InsuraGuest Technologies go up and down completely randomly.

Pair Corralation between Costco Wholesale and InsuraGuest Technologies

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 8.83 times less return on investment than InsuraGuest Technologies. But when comparing it to its historical volatility, Costco Wholesale Corp is 14.79 times less risky than InsuraGuest Technologies. It trades about 0.13 of its potential returns per unit of risk. InsuraGuest Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3.00  in InsuraGuest Technologies on October 22, 2024 and sell it today you would earn a total of  1.00  from holding InsuraGuest Technologies or generate 33.33% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  InsuraGuest Technologies

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.

InsuraGuest Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in InsuraGuest Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, InsuraGuest Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and InsuraGuest Technologies

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

The idea behind Costco Wholesale Corp and InsuraGuest Technologies 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.