Correlation Between Costco Wholesale and WGHT WTCHER

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

Diversification Opportunities for Costco Wholesale and WGHT WTCHER

0.41

Correlation Coefficient

Costco Wholesale  WGHT WTCHER

Very weak diversification

The 3 months correlation between Costco and WGHT is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and WGHT WTCHER INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WGHT WTCHER INTL 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 WGHT WTCHER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WGHT WTCHER INTL has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and WGHT WTCHER go up and down completely randomly.

Pair Corralation between Costco Wholesale and WGHT WTCHER

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to under-perform the WGHT WTCHER. But the stock apears to be less risky and, when comparing its historical volatility, Costco Wholesale Corp is 9.28 times less risky than WGHT WTCHER. The stock trades about -0.26 of its potential returns per unit of risk. The WGHT WTCHER INTL is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  112.00  in WGHT WTCHER INTL on October 6, 2024 and sell it today you would earn a total of  12.00  from holding WGHT WTCHER INTL or generate 10.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Costco Wholesale Corp  vs.  WGHT WTCHER INTL

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 uncertain basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WGHT WTCHER INTL

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WGHT WTCHER INTL are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, WGHT WTCHER unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and WGHT WTCHER

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

The idea behind Costco Wholesale Corp and WGHT WTCHER INTL 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 Commodity Directory module to find actively traded commodities issued by global exchanges.