Correlation Between Costco Wholesale and Performance Food

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

Diversification Opportunities for Costco Wholesale and Performance Food

0.88

Correlation Coefficient

Costco Wholesale  Performance Food

Very poor diversification

The 3 months correlation between Costco and Performance is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food 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 Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Performance Food go up and down completely randomly.

Pair Corralation between Costco Wholesale and Performance Food

Given the investment horizon of 90 days Costco Wholesale Corp is expected to generate 0.83 times more return on investment than Performance Food. However, Costco Wholesale Corp is 1.21 times less risky than Performance Food. It trades about 0.16 of its potential returns per unit of risk. Performance Food Group is currently generating about 0.09 per unit of risk. If you would invest  55,392  in Costco Wholesale Corp on October 1, 2024 and sell it today you would earn a total of  38,578  from holding Costco Wholesale Corp or generate 69.65% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Performance Food Group

Costco Wholesale Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 8 (%) 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.

Performance Food

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Food Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Performance Food may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Costco Wholesale and Performance Food

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

The idea behind Costco Wholesale Corp and Performance Food 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..