Correlation Between FC Investment and Costco Wholesale

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

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

Diversification Opportunities for FC Investment and Costco Wholesale

0.54

Correlation Coefficient

FC Investment  Costco Wholesale

Very weak diversification

The 3 months correlation between FCIT and Costco is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust 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 FC Investment 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 FC Investment Trust 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 FC Investment i.e., FC Investment and Costco Wholesale go up and down completely randomly.

Pair Corralation between FC Investment and Costco Wholesale

Assuming the 90 days trading horizon FC Investment is expected to generate 21.45 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, FC Investment Trust is 34.19 times less risky than Costco Wholesale. It trades about 0.09 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  67,487  in Costco Wholesale Corp on October 9, 2024 and sell it today you would earn a total of  24,819  from holding Costco Wholesale Corp or generate 36.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

FC Investment Trust  vs.  Costco Wholesale Corp

FC Investment Trust

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FC Investment Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FC Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Costco Wholesale Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Costco Wholesale is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FC Investment and Costco Wholesale

The main advantage of trading using opposite FC Investment and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FC Investment 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 FC Investment Trust 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.