Correlation Between Costco Wholesale and Trade Desk

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

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

Diversification Opportunities for Costco Wholesale and Trade Desk

0.8

Correlation Coefficient

Costco Wholesale  Trade Desk

Very poor diversification

The 3 months correlation between Costco and Trade is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and The Trade Desk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Desk 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 Trade Desk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Desk has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Trade Desk go up and down completely randomly.

Pair Corralation between Costco Wholesale and Trade Desk

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.51 times more return on investment than Trade Desk. However, Costco Wholesale is 1.95 times less risky than Trade Desk. It trades about 0.09 of its potential returns per unit of risk. The Trade Desk is currently generating about 0.03 per unit of risk. If you would invest  12,694  in Costco Wholesale on October 26, 2024 and sell it today you would earn a total of  1,300  from holding Costco Wholesale or generate 10.24% return on investment over 90 days.

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

Costco Wholesale  vs.  The Trade Desk

Costco Wholesale

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Trade Desk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Trade Desk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trade Desk may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Costco Wholesale and Trade Desk

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

The idea behind Costco Wholesale and The Trade Desk 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.