Correlation Between Costco Wholesale and Range Resources

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

Diversification Opportunities for Costco Wholesale and Range Resources

0.94

Correlation Coefficient

Costco Wholesale  Range Resources

Almost no diversification

The 3 months correlation between Costco and Range is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Range Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Range Resources Corp 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 Range Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Range Resources Corp has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Range Resources go up and down completely randomly.

Pair Corralation between Costco Wholesale and Range Resources

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.99 times more return on investment than Range Resources. However, Costco Wholesale Corp is 1.01 times less risky than Range Resources. It trades about 0.12 of its potential returns per unit of risk. Range Resources Corp is currently generating about 0.04 per unit of risk. If you would invest  42,494  in Costco Wholesale Corp on October 4, 2024 and sell it today you would earn a total of  46,616  from holding Costco Wholesale Corp or generate 109.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Costco Wholesale Corp  vs.  Range Resources Corp

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.

Range Resources Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Range Resources Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Range Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Costco Wholesale and Range Resources

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

The idea behind Costco Wholesale Corp and Range Resources Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.