Correlation Between CVW CleanTech and Costco Wholesale

Can any of the company-specific risk be diversified away by investing in both CVW CleanTech and Costco Wholesale 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 CVW CleanTech and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVW CleanTech and Costco Wholesale Corp, you can compare the effects of market volatilities on CVW CleanTech and Costco Wholesale 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 CVW CleanTech with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVW CleanTech and Costco Wholesale.

Diversification Opportunities for CVW CleanTech and Costco Wholesale

0.67

Correlation Coefficient

CVW CleanTech  Costco Wholesale

Poor diversification

The 3 months correlation between CVW and Costco is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp and CVW CleanTech 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 CVW CleanTech are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Costco Wholesale go up and down completely randomly.

Pair Corralation between CVW CleanTech and Costco Wholesale

Assuming the 90 days horizon CVW CleanTech is expected to generate 2.26 times more return on investment than Costco Wholesale. However, CVW CleanTech is 2.26 times more volatile than Costco Wholesale Corp. It trades about 0.05 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.06 per unit of risk. If you would invest  86.00  in CVW CleanTech on October 6, 2024 and sell it today you would earn a total of  4.00  from holding CVW CleanTech or generate 4.65% return on investment over 90 days.

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

CVW CleanTech  vs.  Costco Wholesale Corp

CVW CleanTech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CVW CleanTech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Costco Wholesale Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Costco Wholesale is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CVW CleanTech and Costco Wholesale

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

The idea behind CVW CleanTech and Costco Wholesale 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.