Correlation Between Costco Wholesale and Lode Gold

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

Diversification Opportunities for Costco Wholesale and Lode Gold

-0.55

Correlation Coefficient

Costco Wholesale  Lode Gold

Excellent diversification

The 3 months correlation between Costco and Lode is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Lode Gold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lode Gold Resources 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 Lode Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lode Gold Resources has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Lode Gold go up and down completely randomly.

Pair Corralation between Costco Wholesale and Lode Gold

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 4.87 times less return on investment than Lode Gold. But when comparing it to its historical volatility, Costco Wholesale Corp is 11.55 times less risky than Lode Gold. It trades about 0.11 of its potential returns per unit of risk. Lode Gold Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Lode Gold Resources on October 24, 2024 and sell it today you would lose (27.00) from holding Lode Gold Resources or give up 54.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Costco Wholesale Corp  vs.  Lode Gold Resources

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

Lode Gold Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lode Gold Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lode Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and Lode Gold

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

The idea behind Costco Wholesale Corp and Lode Gold Resources 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.