Correlation Between Costco Wholesale and M Split

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

Diversification Opportunities for Costco Wholesale and M Split

0.68

Correlation Coefficient

Costco Wholesale  M Split

Poor diversification

The 3 months correlation between Costco and XMF-PB is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and M Split Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Split Corp 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 M Split. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Split Corp has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and M Split go up and down completely randomly.

Pair Corralation between Costco Wholesale and M Split

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 2.25 times less return on investment than M Split. In addition to that, Costco Wholesale is 1.74 times more volatile than M Split Corp. It trades about 0.05 of its total potential returns per unit of risk. M Split Corp is currently generating about 0.19 per unit of volatility. If you would invest  500.00  in M Split Corp on October 8, 2024 and sell it today you would earn a total of  35.00  from holding M Split Corp or generate 7.0% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  M Split Corp

Costco Wholesale Corp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

M Split Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in M Split Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, M Split may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Costco Wholesale and M Split

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

The idea behind Costco Wholesale Corp and M Split Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.