Correlation Between Costco Wholesale and Materialise

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

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

Diversification Opportunities for Costco Wholesale and Materialise

0.89

Correlation Coefficient

Costco Wholesale  Materialise

Very poor diversification

The 3 months correlation between Costco and Materialise is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Materialise NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materialise NV 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 Corp are associated (or correlated) with Materialise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materialise NV has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Materialise go up and down completely randomly.

Pair Corralation between Costco Wholesale and Materialise

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 9.43 times less return on investment than Materialise. But when comparing it to its historical volatility, Costco Wholesale Corp is 3.44 times less risky than Materialise. It trades about 0.06 of its potential returns per unit of risk. Materialise NV is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  690.00  in Materialise NV on October 22, 2024 and sell it today you would earn a total of  60.00  from holding Materialise NV or generate 8.7% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Materialise NV

Costco Wholesale Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Materialise NV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and Materialise

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

The idea behind Costco Wholesale Corp and Materialise NV 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.