Correlation Between Costco Wholesale and COSMOSTEEL HLDGS

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

Diversification Opportunities for Costco Wholesale and COSMOSTEEL HLDGS

0.42

Correlation Coefficient

Costco Wholesale  COSMOSTEEL HLDGS

Very weak diversification

The 3 months correlation between Costco and COSMOSTEEL is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and COSMOSTEEL HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSMOSTEEL HLDGS 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 COSMOSTEEL HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSMOSTEEL HLDGS has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and COSMOSTEEL HLDGS go up and down completely randomly.

Pair Corralation between Costco Wholesale and COSMOSTEEL HLDGS

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.33 times more return on investment than COSMOSTEEL HLDGS. However, Costco Wholesale Corp is 3.0 times less risky than COSMOSTEEL HLDGS. It trades about -0.31 of its potential returns per unit of risk. COSMOSTEEL HLDGS is currently generating about -0.16 per unit of risk. If you would invest  92,730  in Costco Wholesale Corp on October 9, 2024 and sell it today you would lose (4,270) from holding Costco Wholesale Corp or give up 4.6% of portfolio value over 90 days.

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

Costco Wholesale Corp  vs.  COSMOSTEEL HLDGS

Costco Wholesale Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in February 2025.

COSMOSTEEL HLDGS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COSMOSTEEL HLDGS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, COSMOSTEEL HLDGS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Costco Wholesale and COSMOSTEEL HLDGS

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

The idea behind Costco Wholesale Corp and COSMOSTEEL HLDGS 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.