Correlation Between Costco Wholesale and Visa

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

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

Diversification Opportunities for Costco Wholesale and Visa

0.93

Correlation Coefficient

Costco Wholesale  Visa

Almost no diversification

The 3 months correlation between Costco and Visa is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Visa go up and down completely randomly.

Pair Corralation between Costco Wholesale and Visa

Assuming the 90 days trading horizon Costco Wholesale is expected to under-perform the Visa. In addition to that, Costco Wholesale is 1.28 times more volatile than Visa Inc. It trades about -0.18 of its total potential returns per unit of risk. Visa Inc is currently generating about -0.16 per unit of volatility. If you would invest  9,759  in Visa Inc on October 15, 2024 and sell it today you would lose (459.00) from holding Visa Inc or give up 4.7% of portfolio value over 90 days.

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

Costco Wholesale  vs.  Visa Inc

Costco Wholesale

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 10 (%) 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.

Visa Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Visa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and Visa

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

The idea behind Costco Wholesale and Visa Inc 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.

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 CEOs Directory module to screen CEOs from public companies around the world.