Correlation Between COSTCO WHOLESALE and HORNBACH Baumarkt

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

Diversification Opportunities for COSTCO WHOLESALE and HORNBACH Baumarkt

-0.22

Correlation Coefficient

COSTCO WHOLESALE  HORNBACH Baumarkt

Very good diversification

The 3 months correlation between COSTCO and HORNBACH is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and HORNBACH Baumarkt AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HORNBACH Baumarkt 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 HORNBACH Baumarkt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HORNBACH Baumarkt has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and HORNBACH Baumarkt go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and HORNBACH Baumarkt

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to under-perform the HORNBACH Baumarkt. In addition to that, COSTCO WHOLESALE is 1.48 times more volatile than HORNBACH Baumarkt AG. It trades about -0.07 of its total potential returns per unit of risk. HORNBACH Baumarkt AG is currently generating about 0.12 per unit of volatility. If you would invest  6,100  in HORNBACH Baumarkt AG on December 22, 2024 and sell it today you would earn a total of  600.00  from holding HORNBACH Baumarkt AG or generate 9.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

COSTCO WHOLESALE CDR  vs.  HORNBACH Baumarkt AG

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days COSTCO WHOLESALE CDR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HORNBACH Baumarkt

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HORNBACH Baumarkt AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, HORNBACH Baumarkt may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with COSTCO WHOLESALE and HORNBACH Baumarkt

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

The idea behind COSTCO WHOLESALE CDR and HORNBACH Baumarkt AG 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.