Correlation Between COSTCO WHOLESALE and MOTOROLA SOLTN

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

Diversification Opportunities for COSTCO WHOLESALE and MOTOROLA SOLTN

0.77

Correlation Coefficient

COSTCO WHOLESALE  MOTOROLA SOLTN

Poor diversification

The 3 months correlation between COSTCO and MOTOROLA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and MOTOROLA SOLTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOTOROLA SOLTN 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 MOTOROLA SOLTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOTOROLA SOLTN has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and MOTOROLA SOLTN go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and MOTOROLA SOLTN

Assuming the 90 days trading horizon COSTCO WHOLESALE is expected to generate 1.25 times less return on investment than MOTOROLA SOLTN. In addition to that, COSTCO WHOLESALE is 1.09 times more volatile than MOTOROLA SOLTN . It trades about 0.11 of its total potential returns per unit of risk. MOTOROLA SOLTN is currently generating about 0.15 per unit of volatility. If you would invest  39,670  in MOTOROLA SOLTN on September 13, 2024 and sell it today you would earn a total of  5,800  from holding MOTOROLA SOLTN or generate 14.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

COSTCO WHOLESALE CDR  vs.  MOTOROLA SOLTN

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 8 (%) 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.

MOTOROLA SOLTN

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with COSTCO WHOLESALE and MOTOROLA SOLTN

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

The idea behind COSTCO WHOLESALE CDR and MOTOROLA SOLTN 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.