Correlation Between RETAIL FOOD and COSTCO WHOLESALE

Can any of the company-specific risk be diversified away by investing in both RETAIL FOOD 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 RETAIL FOOD and COSTCO WHOLESALE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RETAIL FOOD GROUP and COSTCO WHOLESALE CDR, you can compare the effects of market volatilities on RETAIL FOOD 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 RETAIL FOOD with a short position of COSTCO WHOLESALE. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and COSTCO WHOLESALE.

Diversification Opportunities for RETAIL FOOD and COSTCO WHOLESALE

0.38

Correlation Coefficient

RETAIL FOOD  COSTCO WHOLESALE

Weak diversification

The 3 months correlation between RETAIL and COSTCO is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and COSTCO WHOLESALE CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTCO WHOLESALE CDR and RETAIL FOOD 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 RETAIL FOOD GROUP 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 CDR has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and COSTCO WHOLESALE go up and down completely randomly.

Pair Corralation between RETAIL FOOD and COSTCO WHOLESALE

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to under-perform the COSTCO WHOLESALE. In addition to that, RETAIL FOOD is 2.91 times more volatile than COSTCO WHOLESALE CDR. It trades about -0.32 of its total potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about -0.23 per unit of volatility. If you would invest  3,060  in COSTCO WHOLESALE CDR on October 15, 2024 and sell it today you would lose (140.00) from holding COSTCO WHOLESALE CDR or give up 4.58% of portfolio value over 90 days.

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

RETAIL FOOD GROUP  vs.  COSTCO WHOLESALE CDR

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 5 (%) 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 February 2025.

Pair Trading with RETAIL FOOD and COSTCO WHOLESALE

The main advantage of trading using opposite RETAIL FOOD and COSTCO WHOLESALE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RETAIL FOOD 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 RETAIL FOOD GROUP and COSTCO WHOLESALE CDR 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.