Correlation Between COSTCO WHOLESALE and GEAR4MUSIC (HLDGS)

Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE and GEAR4MUSIC (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 GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC LS 10, you can compare the effects of market volatilities on COSTCO WHOLESALE and GEAR4MUSIC (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 GEAR4MUSIC (HLDGS). Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and GEAR4MUSIC (HLDGS).

Diversification Opportunities for COSTCO WHOLESALE and GEAR4MUSIC (HLDGS)

-0.23

Correlation Coefficient

COSTCO WHOLESALE  GEAR4MUSIC (HLDGS)

Very good diversification

The 3 months correlation between COSTCO and GEAR4MUSIC is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC (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 CDR are associated (or correlated) with GEAR4MUSIC (HLDGS). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC (HLDGS) has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and GEAR4MUSIC (HLDGS) go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and GEAR4MUSIC (HLDGS)

Assuming the 90 days trading horizon COSTCO WHOLESALE is expected to generate 1.11 times less return on investment than GEAR4MUSIC (HLDGS). But when comparing it to its historical volatility, COSTCO WHOLESALE CDR is 1.2 times less risky than GEAR4MUSIC (HLDGS). It trades about 0.04 of its potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  185.00  in GEAR4MUSIC LS 10 on October 3, 2024 and sell it today you would earn a total of  12.00  from holding GEAR4MUSIC LS 10 or generate 6.49% return on investment over 90 days.

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

COSTCO WHOLESALE CDR  vs.  GEAR4MUSIC LS 10

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 5 (%) 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 February 2025.

GEAR4MUSIC (HLDGS)

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GEAR4MUSIC (HLDGS) is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with COSTCO WHOLESALE and GEAR4MUSIC (HLDGS)

The main advantage of trading using opposite COSTCO WHOLESALE and GEAR4MUSIC (HLDGS) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE position performs unexpectedly, GEAR4MUSIC (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 GEAR4MUSIC (HLDGS) will offset losses from the drop in GEAR4MUSIC (HLDGS)'s long position.

The idea behind COSTCO WHOLESALE CDR and GEAR4MUSIC LS 10 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.