Correlation Between Costco Wholesale and SpartanNash

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

Diversification Opportunities for Costco Wholesale and SpartanNash

0.28

Correlation Coefficient

Costco Wholesale  SpartanNash

Modest diversification

The 3 months correlation between Costco and SpartanNash is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and SpartanNash Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpartanNash 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 SpartanNash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpartanNash has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and SpartanNash go up and down completely randomly.

Pair Corralation between Costco Wholesale and SpartanNash

Given the investment horizon of 90 days Costco Wholesale is expected to generate 7.56 times less return on investment than SpartanNash. But when comparing it to its historical volatility, Costco Wholesale Corp is 1.29 times less risky than SpartanNash. It trades about 0.02 of its potential returns per unit of risk. SpartanNash Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,783  in SpartanNash Co on December 30, 2024 and sell it today you would earn a total of  220.00  from holding SpartanNash Co or generate 12.34% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  SpartanNash Co

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 comparatively stable basic indicators, Costco Wholesale is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SpartanNash

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SpartanNash Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, SpartanNash displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and SpartanNash

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

The idea behind Costco Wholesale Corp and SpartanNash Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.