Correlation Between Costco Wholesale and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Verizon Communications, you can compare the effects of market volatilities on Costco Wholesale and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Verizon Communications.
Diversification Opportunities for Costco Wholesale and Verizon Communications
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Costco and Verizon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Verizon Communications go up and down completely randomly.
Pair Corralation between Costco Wholesale and Verizon Communications
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.05 times more return on investment than Verizon Communications. However, Costco Wholesale is 1.05 times more volatile than Verizon Communications. It trades about 0.17 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.09 per unit of risk. If you would invest 12,493 in Costco Wholesale on September 7, 2024 and sell it today you would earn a total of 2,283 from holding Costco Wholesale or generate 18.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Costco Wholesale vs. Verizon Communications
Performance |
Timeline |
Costco Wholesale |
Verizon Communications |
Costco Wholesale and Verizon Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Costco Wholesale and Verizon Communications
The main advantage of trading using opposite Costco Wholesale and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.Costco Wholesale vs. Clave Indices De | Costco Wholesale vs. Fica Empreendimentos Imobiliarios | Costco Wholesale vs. Magazine Luiza SA | Costco Wholesale vs. Marriott International |
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Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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