Correlation Between Lumia and Costco Wholesale

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

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

Diversification Opportunities for Lumia and Costco Wholesale

0.37

Correlation Coefficient

Lumia  Costco Wholesale

Weak diversification

The 3 months correlation between Lumia and Costco is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lumia 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 Lumia 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 Lumia 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 Lumia i.e., Lumia and Costco Wholesale go up and down completely randomly.

Pair Corralation between Lumia and Costco Wholesale

Assuming the 90 days trading horizon Lumia is expected to generate 226.68 times more return on investment than Costco Wholesale. However, Lumia is 226.68 times more volatile than Costco Wholesale Corp. It trades about 0.21 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about -0.33 per unit of risk. If you would invest  0.00  in Lumia on October 10, 2024 and sell it today you would earn a total of  128.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Lumia  vs.  Costco Wholesale Corp

Lumia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Lumia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Costco Wholesale Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 4 (%) 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 Lumia and Costco Wholesale

The main advantage of trading using opposite Lumia and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia 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 Lumia 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.