Correlation Between COSTCO WHOLESALE and Pacific Basin

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

Diversification Opportunities for COSTCO WHOLESALE and Pacific Basin

-0.28

Correlation Coefficient

COSTCO WHOLESALE  Pacific Basin

Very good diversification

The 3 months correlation between COSTCO and Pacific is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and Pacific Basin Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Basin Shipping 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 Pacific Basin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Basin Shipping has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Pacific Basin go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and Pacific Basin

Assuming the 90 days trading horizon COSTCO WHOLESALE is expected to generate 39.16 times less return on investment than Pacific Basin. But when comparing it to its historical volatility, COSTCO WHOLESALE CDR is 2.07 times less risky than Pacific Basin. It trades about 0.01 of its potential returns per unit of risk. Pacific Basin Shipping is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Pacific Basin Shipping on October 22, 2024 and sell it today you would earn a total of  1.00  from holding Pacific Basin Shipping or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

COSTCO WHOLESALE CDR  vs.  Pacific Basin Shipping

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COSTCO WHOLESALE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pacific Basin Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Basin Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with COSTCO WHOLESALE and Pacific Basin

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

The idea behind COSTCO WHOLESALE CDR and Pacific Basin Shipping 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.