Correlation Between Costco Wholesale and MTN Group

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

Diversification Opportunities for Costco Wholesale and MTN Group

-0.74

Correlation Coefficient

Costco Wholesale  MTN Group

Pay attention - limited upside

The 3 months correlation between Costco and MTN is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and MTN Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group Limited 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 MTN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group Limited has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and MTN Group go up and down completely randomly.

Pair Corralation between Costco Wholesale and MTN Group

Given the investment horizon of 90 days Costco Wholesale Corp is expected to under-perform the MTN Group. But the stock apears to be less risky and, when comparing its historical volatility, Costco Wholesale Corp is 2.06 times less risky than MTN Group. The stock trades about -0.03 of its potential returns per unit of risk. The MTN Group Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  448.00  in MTN Group Limited on October 24, 2024 and sell it today you would earn a total of  42.00  from holding MTN Group Limited or generate 9.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Costco Wholesale Corp  vs.  MTN Group Limited

Costco Wholesale Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 7 (%) 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 February 2025.

MTN Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Costco Wholesale and MTN Group

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

The idea behind Costco Wholesale Corp and MTN Group Limited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.