Correlation Between COSTCO WHOLESALE and Mastercard

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

Diversification Opportunities for COSTCO WHOLESALE and Mastercard

0.84

Correlation Coefficient

COSTCO WHOLESALE  Mastercard

Very poor diversification

The 3 months correlation between COSTCO and Mastercard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Mastercard go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and Mastercard

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.37 times more return on investment than Mastercard. However, COSTCO WHOLESALE is 1.37 times more volatile than Mastercard. It trades about 0.09 of its potential returns per unit of risk. Mastercard is currently generating about 0.08 per unit of risk. If you would invest  1,517  in COSTCO WHOLESALE CDR on October 4, 2024 and sell it today you would earn a total of  1,343  from holding COSTCO WHOLESALE CDR or generate 88.53% 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.  Mastercard

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 6 (%) 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.

Mastercard

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mastercard reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COSTCO WHOLESALE and Mastercard

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

The idea behind COSTCO WHOLESALE CDR and Mastercard 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..