Correlation Between COSTCO WHOLESALE and MT Bank

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

Diversification Opportunities for COSTCO WHOLESALE and MT Bank

0.75

Correlation Coefficient

COSTCO WHOLESALE  MT Bank

Poor diversification

The 3 months correlation between COSTCO and MTZ is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and MT Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank Corp 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 MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank Corp has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and MT Bank go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and MT Bank

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.1 times more return on investment than MT Bank. However, COSTCO WHOLESALE is 1.1 times more volatile than MT Bank Corp. It trades about 0.11 of its potential returns per unit of risk. MT Bank Corp is currently generating about -0.35 per unit of risk. If you would invest  2,880  in COSTCO WHOLESALE CDR on September 21, 2024 and sell it today you would earn a total of  100.00  from holding COSTCO WHOLESALE CDR or generate 3.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

COSTCO WHOLESALE CDR  vs.  MT Bank Corp

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 9 (%) 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.

MT Bank Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COSTCO WHOLESALE and MT Bank

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

The idea behind COSTCO WHOLESALE CDR and MT Bank Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.