Correlation Between Marimaca Copper and Costco Wholesale

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

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

Diversification Opportunities for Marimaca Copper and Costco Wholesale

0.7

Correlation Coefficient

Marimaca Copper  Costco Wholesale

Poor diversification

The 3 months correlation between Marimaca and Costco is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Marimaca Copper Corp 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 Marimaca Copper 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 Marimaca Copper Corp 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 Marimaca Copper i.e., Marimaca Copper and Costco Wholesale go up and down completely randomly.

Pair Corralation between Marimaca Copper and Costco Wholesale

Assuming the 90 days trading horizon Marimaca Copper Corp is expected to generate 3.72 times more return on investment than Costco Wholesale. However, Marimaca Copper is 3.72 times more volatile than Costco Wholesale Corp. It trades about 0.06 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  481.00  in Marimaca Copper Corp on September 23, 2024 and sell it today you would earn a total of  14.00  from holding Marimaca Copper Corp or generate 2.91% return on investment over 90 days.

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

Marimaca Copper Corp  vs.  Costco Wholesale Corp

Marimaca Copper Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marimaca Copper Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Marimaca Copper displayed 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 rather sound technical and fundamental indicators, Costco Wholesale is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Marimaca Copper and Costco Wholesale

The main advantage of trading using opposite Marimaca Copper and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marimaca Copper 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 Marimaca Copper Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.