Correlation Between FORMPIPE SOFTWARE and Costco Wholesale

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

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

Diversification Opportunities for FORMPIPE SOFTWARE and Costco Wholesale

0.69

Correlation Coefficient

FORMPIPE SOFTWARE  Costco Wholesale

Poor diversification

The 3 months correlation between FORMPIPE and Costco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding FORMPIPE SOFTWARE AB and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and FORMPIPE SOFTWARE 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 FORMPIPE SOFTWARE AB 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 has no effect on the direction of FORMPIPE SOFTWARE i.e., FORMPIPE SOFTWARE and Costco Wholesale go up and down completely randomly.

Pair Corralation between FORMPIPE SOFTWARE and Costco Wholesale

Assuming the 90 days horizon FORMPIPE SOFTWARE is expected to generate 1.68 times less return on investment than Costco Wholesale. In addition to that, FORMPIPE SOFTWARE is 1.83 times more volatile than Costco Wholesale. It trades about 0.04 of its total potential returns per unit of risk. Costco Wholesale is currently generating about 0.13 per unit of volatility. If you would invest  41,715  in Costco Wholesale on September 14, 2024 and sell it today you would earn a total of  54,125  from holding Costco Wholesale or generate 129.75% return on investment over 90 days.

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

FORMPIPE SOFTWARE AB  vs.  Costco Wholesale

FORMPIPE SOFTWARE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FORMPIPE SOFTWARE AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FORMPIPE SOFTWARE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Costco Wholesale

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Costco Wholesale reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FORMPIPE SOFTWARE and Costco Wholesale

The main advantage of trading using opposite FORMPIPE SOFTWARE and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FORMPIPE SOFTWARE 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 FORMPIPE SOFTWARE AB and Costco Wholesale 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.