Correlation Between Costco Wholesale and Vodafone Group

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

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

Diversification Opportunities for Costco Wholesale and Vodafone Group

-0.65

Correlation Coefficient

Costco Wholesale  Vodafone Group

Excellent diversification

The 3 months correlation between Costco and Vodafone is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Vodafone Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group Public 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group Public has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Vodafone Group go up and down completely randomly.

Pair Corralation between Costco Wholesale and Vodafone Group

Assuming the 90 days trading horizon Costco Wholesale is expected to under-perform the Vodafone Group. In addition to that, Costco Wholesale is 1.09 times more volatile than Vodafone Group Public. It trades about -0.08 of its total potential returns per unit of risk. Vodafone Group Public is currently generating about 0.03 per unit of volatility. If you would invest  2,600  in Vodafone Group Public on December 26, 2024 and sell it today you would earn a total of  58.00  from holding Vodafone Group Public or generate 2.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Costco Wholesale  vs.  Vodafone Group Public

Costco Wholesale

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Vodafone Group Public

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Group Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Vodafone Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Costco Wholesale and Vodafone Group

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

The idea behind Costco Wholesale and Vodafone Group Public 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.