Correlation Between Costco Wholesale and Xtract One

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

Diversification Opportunities for Costco Wholesale and Xtract One

0.05

Correlation Coefficient

Costco Wholesale  Xtract One

Significant diversification

The 3 months correlation between Costco and Xtract is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Xtract One Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtract One Technologies 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 Xtract One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtract One Technologies has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Xtract One go up and down completely randomly.

Pair Corralation between Costco Wholesale and Xtract One

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.42 times more return on investment than Xtract One. However, Costco Wholesale Corp is 2.39 times less risky than Xtract One. It trades about 0.02 of its potential returns per unit of risk. Xtract One Technologies is currently generating about -0.12 per unit of risk. If you would invest  4,237  in Costco Wholesale Corp on December 31, 2024 and sell it today you would earn a total of  40.00  from holding Costco Wholesale Corp or generate 0.94% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Xtract One Technologies

Costco Wholesale Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 1 (%) 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.

Xtract One Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtract One Technologies 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 basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Costco Wholesale and Xtract One

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

The idea behind Costco Wholesale Corp and Xtract One Technologies 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.