Correlation Between Costco Wholesale and Porto Seguro

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

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

Diversification Opportunities for Costco Wholesale and Porto Seguro

0.66

Correlation Coefficient

Costco Wholesale  Porto Seguro

Poor diversification

The 3 months correlation between Costco and Porto is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Porto Seguro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porto Seguro SA 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 Porto Seguro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porto Seguro SA has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Porto Seguro go up and down completely randomly.

Pair Corralation between Costco Wholesale and Porto Seguro

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.32 times more return on investment than Porto Seguro. However, Costco Wholesale is 1.32 times more volatile than Porto Seguro SA. It trades about 0.2 of its potential returns per unit of risk. Porto Seguro SA is currently generating about 0.15 per unit of risk. If you would invest  12,365  in Costco Wholesale on September 17, 2024 and sell it today you would earn a total of  2,673  from holding Costco Wholesale or generate 21.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Costco Wholesale  vs.  Porto Seguro SA

Costco Wholesale

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 15 (%) 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.

Porto Seguro SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Porto Seguro SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Porto Seguro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Costco Wholesale and Porto Seguro

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

The idea behind Costco Wholesale and Porto Seguro SA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.