Correlation Between Costco Wholesale and Village Super

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

Diversification Opportunities for Costco Wholesale and Village Super

0.52

Correlation Coefficient

Costco Wholesale  Village Super

Very weak diversification

The 3 months correlation between Costco and Village is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Village Super Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Super Market 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 Village Super. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Super Market has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Village Super go up and down completely randomly.

Pair Corralation between Costco Wholesale and Village Super

Given the investment horizon of 90 days Costco Wholesale Corp is expected to generate 0.42 times more return on investment than Village Super. However, Costco Wholesale Corp is 2.37 times less risky than Village Super. It trades about 0.16 of its potential returns per unit of risk. Village Super Market is currently generating about 0.01 per unit of risk. If you would invest  89,608  in Costco Wholesale Corp on September 17, 2024 and sell it today you would earn a total of  9,982  from holding Costco Wholesale Corp or generate 11.14% 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.  Village Super Market

Costco Wholesale Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 12 (%) 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.

Village Super Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Super Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Village Super is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Costco Wholesale and Village Super

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

The idea behind Costco Wholesale Corp and Village Super Market 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.