Correlation Between Costco Wholesale and Sun Peak

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

Diversification Opportunities for Costco Wholesale and Sun Peak

-0.6

Correlation Coefficient

Costco Wholesale  Sun Peak

Excellent diversification

The 3 months correlation between Costco and Sun is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Sun Peak Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Peak Metals 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 Sun Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Peak Metals has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Sun Peak go up and down completely randomly.

Pair Corralation between Costco Wholesale and Sun Peak

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.27 times less return on investment than Sun Peak. But when comparing it to its historical volatility, Costco Wholesale Corp is 5.02 times less risky than Sun Peak. It trades about 0.12 of its potential returns per unit of risk. Sun Peak Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Sun Peak Metals on October 11, 2024 and sell it today you would earn a total of  3.00  from holding Sun Peak Metals or generate 10.71% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Sun Peak Metals

Costco Wholesale Corp

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 5 (%) 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.

Sun Peak Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Peak Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Costco Wholesale and Sun Peak

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

The idea behind Costco Wholesale Corp and Sun Peak Metals 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.