Correlation Between COSTCO WHOLESALE and MGIC INVESTMENT
Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE and MGIC INVESTMENT 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 MGIC INVESTMENT 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 MGIC INVESTMENT, you can compare the effects of market volatilities on COSTCO WHOLESALE and MGIC INVESTMENT 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 MGIC INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and MGIC INVESTMENT.
Diversification Opportunities for COSTCO WHOLESALE and MGIC INVESTMENT
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between COSTCO and MGIC is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT 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 MGIC INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC INVESTMENT has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and MGIC INVESTMENT go up and down completely randomly.
Pair Corralation between COSTCO WHOLESALE and MGIC INVESTMENT
Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.19 times more return on investment than MGIC INVESTMENT. However, COSTCO WHOLESALE is 1.19 times more volatile than MGIC INVESTMENT. It trades about 0.11 of its potential returns per unit of risk. MGIC INVESTMENT is currently generating about 0.05 per unit of risk. If you would invest 2,774 in COSTCO WHOLESALE CDR on September 14, 2024 and sell it today you would earn a total of 306.00 from holding COSTCO WHOLESALE CDR or generate 11.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
COSTCO WHOLESALE CDR vs. MGIC INVESTMENT
Performance |
Timeline |
COSTCO WHOLESALE CDR |
MGIC INVESTMENT |
COSTCO WHOLESALE and MGIC INVESTMENT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with COSTCO WHOLESALE and MGIC INVESTMENT
The main advantage of trading using opposite COSTCO WHOLESALE and MGIC INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE position performs unexpectedly, MGIC INVESTMENT 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 MGIC INVESTMENT will offset losses from the drop in MGIC INVESTMENT's long position.COSTCO WHOLESALE vs. Walmart | COSTCO WHOLESALE vs. Costco Wholesale | COSTCO WHOLESALE vs. Dollarama | COSTCO WHOLESALE vs. Superior Plus Corp |
MGIC INVESTMENT vs. Apple Inc | MGIC INVESTMENT vs. Apple Inc | MGIC INVESTMENT vs. Apple Inc | MGIC INVESTMENT vs. Apple Inc |
Check out your portfolio center.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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