Correlation Between Costco Wholesale and ZENERGY B

Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and ZENERGY B 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 ZENERGY B 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 ZENERGY B AB, you can compare the effects of market volatilities on Costco Wholesale and ZENERGY B 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 ZENERGY B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and ZENERGY B.

Diversification Opportunities for Costco Wholesale and ZENERGY B

-0.46

Correlation Coefficient

Costco Wholesale  ZENERGY B

Very good diversification

The 3 months correlation between Costco and ZENERGY is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and ZENERGY B AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZENERGY B AB 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 ZENERGY B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZENERGY B AB has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and ZENERGY B go up and down completely randomly.

Pair Corralation between Costco Wholesale and ZENERGY B

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.18 times more return on investment than ZENERGY B. However, Costco Wholesale Corp is 5.44 times less risky than ZENERGY B. It trades about 0.13 of its potential returns per unit of risk. ZENERGY B AB is currently generating about -0.16 per unit of risk. If you would invest  82,650  in Costco Wholesale Corp on October 25, 2024 and sell it today you would earn a total of  7,940  from holding Costco Wholesale Corp or generate 9.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Costco Wholesale Corp  vs.  ZENERGY B AB

Costco Wholesale Corp

Risk-Adjusted Performance

10 of 100

OK

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

ZENERGY B AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZENERGY B AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Costco Wholesale and ZENERGY B

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

The idea behind Costco Wholesale Corp and ZENERGY B AB 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.