Correlation Between Costco Wholesale and Companhia Tecidos

Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Companhia Tecidos 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 Companhia Tecidos into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Costco Wholesale and Companhia Tecidos Santanense, you can compare the effects of market volatilities on Costco Wholesale and Companhia Tecidos 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 Companhia Tecidos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Companhia Tecidos.

Diversification Opportunities for Costco Wholesale and Companhia Tecidos

-0.87

Correlation Coefficient

Costco Wholesale  Companhia Tecidos

Pay attention - limited upside

The 3 months correlation between Costco and Companhia is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Companhia Tecidos Santanense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Tecidos 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 are associated (or correlated) with Companhia Tecidos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Tecidos has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Companhia Tecidos go up and down completely randomly.

Pair Corralation between Costco Wholesale and Companhia Tecidos

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.71 times more return on investment than Companhia Tecidos. However, Costco Wholesale is 1.41 times less risky than Companhia Tecidos. It trades about 0.21 of its potential returns per unit of risk. Companhia Tecidos Santanense is currently generating about -0.4 per unit of risk. If you would invest  12,014  in Costco Wholesale on September 27, 2024 and sell it today you would earn a total of  2,855  from holding Costco Wholesale or generate 23.76% return on investment over 90 days.

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

Costco Wholesale  vs.  Companhia Tecidos Santanense

Costco Wholesale

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Costco Wholesale sustained solid returns over the last few months and may actually be approaching a breakup point.

Companhia Tecidos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Tecidos Santanense has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Costco Wholesale and Companhia Tecidos

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

The idea behind Costco Wholesale and Companhia Tecidos Santanense 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.