Correlation Between Costco Wholesale and LANSON BCC

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

Diversification Opportunities for Costco Wholesale and LANSON BCC

-0.96

Correlation Coefficient

Costco Wholesale  LANSON BCC

Pay attention - limited upside

The 3 months correlation between Costco and LANSON is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and LANSON BCC INH EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LANSON BCC INH 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 LANSON BCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LANSON BCC INH has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and LANSON BCC go up and down completely randomly.

Pair Corralation between Costco Wholesale and LANSON BCC

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.95 times more return on investment than LANSON BCC. However, Costco Wholesale Corp is 1.05 times less risky than LANSON BCC. It trades about 0.06 of its potential returns per unit of risk. LANSON BCC INH EO is currently generating about -0.12 per unit of risk. If you would invest  81,319  in Costco Wholesale Corp on October 4, 2024 and sell it today you would earn a total of  8,291  from holding Costco Wholesale Corp or generate 10.2% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  LANSON BCC INH EO

Costco Wholesale Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 13 (%) 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.

LANSON BCC INH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LANSON BCC INH EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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 LANSON BCC

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

The idea behind Costco Wholesale Corp and LANSON BCC INH EO 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.