Correlation Between COSTCO WHOLESALE and Caseys General

Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE and Caseys General 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 Caseys General into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COSTCO WHOLESALE CDR and Caseys General Stores, you can compare the effects of market volatilities on COSTCO WHOLESALE and Caseys General 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 Caseys General. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and Caseys General.

Diversification Opportunities for COSTCO WHOLESALE and Caseys General

0.82

Correlation Coefficient

COSTCO WHOLESALE  Caseys General

Very poor diversification

The 3 months correlation between COSTCO and Caseys is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and Caseys General Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caseys General Stores 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 CDR are associated (or correlated) with Caseys General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caseys General Stores has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Caseys General go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and Caseys General

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.16 times more return on investment than Caseys General. However, COSTCO WHOLESALE is 1.16 times more volatile than Caseys General Stores. It trades about 0.07 of its potential returns per unit of risk. Caseys General Stores is currently generating about -0.03 per unit of risk. If you would invest  2,920  in COSTCO WHOLESALE CDR on September 22, 2024 and sell it today you would earn a total of  60.00  from holding COSTCO WHOLESALE CDR or generate 2.05% return on investment over 90 days.

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

COSTCO WHOLESALE CDR  vs.  Caseys General Stores

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COSTCO WHOLESALE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Caseys General Stores

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Caseys General unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COSTCO WHOLESALE and Caseys General

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

The idea behind COSTCO WHOLESALE CDR and Caseys General Stores 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 Global Correlations module to find global opportunities by holding instruments from different markets.