Correlation Between COSTCO WHOLESALE and SPORTING

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

Diversification Opportunities for COSTCO WHOLESALE and SPORTING

0.21

Correlation Coefficient

COSTCO WHOLESALE  SPORTING

Modest diversification

The 3 months correlation between COSTCO and SPORTING is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and SPORTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORTING 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 SPORTING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORTING has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and SPORTING go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and SPORTING

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.27 times more return on investment than SPORTING. However, COSTCO WHOLESALE is 1.27 times more volatile than SPORTING. It trades about 0.17 of its potential returns per unit of risk. SPORTING is currently generating about 0.06 per unit of risk. If you would invest  2,734  in COSTCO WHOLESALE CDR on September 13, 2024 and sell it today you would earn a total of  346.00  from holding COSTCO WHOLESALE CDR or generate 12.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

COSTCO WHOLESALE CDR  vs.  SPORTING

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.

SPORTING

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPORTING are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, SPORTING may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with COSTCO WHOLESALE and SPORTING

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

The idea behind COSTCO WHOLESALE CDR and SPORTING 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.