Correlation Between Costco Wholesale and Tidewater Midstream

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

Diversification Opportunities for Costco Wholesale and Tidewater Midstream

-0.77

Correlation Coefficient

Costco Wholesale  Tidewater Midstream

Pay attention - limited upside

The 3 months correlation between Costco and Tidewater is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Tidewater Midstream and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidewater Midstream and 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 Tidewater Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidewater Midstream and has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Tidewater Midstream go up and down completely randomly.

Pair Corralation between Costco Wholesale and Tidewater Midstream

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.15 times more return on investment than Tidewater Midstream. However, Costco Wholesale Corp is 6.66 times less risky than Tidewater Midstream. It trades about 0.08 of its potential returns per unit of risk. Tidewater Midstream and is currently generating about -0.09 per unit of risk. If you would invest  4,171  in Costco Wholesale Corp on October 23, 2024 and sell it today you would earn a total of  229.00  from holding Costco Wholesale Corp or generate 5.49% 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.  Tidewater Midstream and

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.

Tidewater Midstream and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidewater Midstream and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Costco Wholesale and Tidewater Midstream

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

The idea behind Costco Wholesale Corp and Tidewater Midstream and 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.