Correlation Between Costco Wholesale and Hf Foods

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

Diversification Opportunities for Costco Wholesale and Hf Foods

0.59

Correlation Coefficient

Costco Wholesale  Hf Foods

Very weak diversification

The 3 months correlation between Costco and HFFG is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Hf Foods Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hf Foods Group 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 Hf Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hf Foods Group has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Hf Foods go up and down completely randomly.

Pair Corralation between Costco Wholesale and Hf Foods

Given the investment horizon of 90 days Costco Wholesale is expected to generate 1.84 times less return on investment than Hf Foods. But when comparing it to its historical volatility, Costco Wholesale Corp is 2.87 times less risky than Hf Foods. It trades about 0.13 of its potential returns per unit of risk. Hf Foods Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  336.00  in Hf Foods Group on September 13, 2024 and sell it today you would earn a total of  47.00  from holding Hf Foods Group or generate 13.99% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Hf Foods Group

Costco Wholesale Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hf Foods Group

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hf Foods Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Hf Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and Hf Foods

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

The idea behind Costco Wholesale Corp and Hf Foods Group 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.