Correlation Between Costco Wholesale and Mundoro Capital

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

Diversification Opportunities for Costco Wholesale and Mundoro Capital

-0.37

Correlation Coefficient

Costco Wholesale  Mundoro Capital

Very good diversification

The 3 months correlation between Costco and Mundoro is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Mundoro Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mundoro Capital 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 Mundoro Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mundoro Capital has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Mundoro Capital go up and down completely randomly.

Pair Corralation between Costco Wholesale and Mundoro Capital

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to under-perform the Mundoro Capital. But the stock apears to be less risky and, when comparing its historical volatility, Costco Wholesale Corp is 2.73 times less risky than Mundoro Capital. The stock trades about -0.05 of its potential returns per unit of risk. The Mundoro Capital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Mundoro Capital on December 24, 2024 and sell it today you would earn a total of  2.00  from holding Mundoro Capital or generate 11.11% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Mundoro Capital

Costco Wholesale Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Mundoro Capital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mundoro Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Mundoro Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and Mundoro Capital

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

The idea behind Costco Wholesale Corp and Mundoro Capital 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.