Correlation Between Costco Wholesale and Westshore Terminals

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

Diversification Opportunities for Costco Wholesale and Westshore Terminals

0.34

Correlation Coefficient

Costco Wholesale  Westshore Terminals

Weak diversification

The 3 months correlation between Costco and Westshore is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Westshore Terminals Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westshore Terminals 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 Westshore Terminals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westshore Terminals has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Westshore Terminals go up and down completely randomly.

Pair Corralation between Costco Wholesale and Westshore Terminals

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to under-perform the Westshore Terminals. But the stock apears to be less risky and, when comparing its historical volatility, Costco Wholesale Corp is 1.06 times less risky than Westshore Terminals. The stock trades about -0.04 of its potential returns per unit of risk. The Westshore Terminals Investment is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,253  in Westshore Terminals Investment on December 23, 2024 and sell it today you would earn a total of  235.00  from holding Westshore Terminals Investment or generate 10.43% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Westshore Terminals Investment

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

Westshore Terminals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westshore Terminals Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Westshore Terminals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Costco Wholesale and Westshore Terminals

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

The idea behind Costco Wholesale Corp and Westshore Terminals Investment 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.