Correlation Between NAMCO BANDAI and Costco Wholesale

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

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

Diversification Opportunities for NAMCO BANDAI and Costco Wholesale

0.41

Correlation Coefficient

NAMCO BANDAI  Costco Wholesale

Very weak diversification

The 3 months correlation between NAMCO and Costco is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NAMCO BANDAI HLDG 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 NAMCO BANDAI 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 NAMCO BANDAI HLDG 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 NAMCO BANDAI i.e., NAMCO BANDAI and Costco Wholesale go up and down completely randomly.

Pair Corralation between NAMCO BANDAI and Costco Wholesale

Assuming the 90 days trading horizon NAMCO BANDAI HLDG is expected to generate 1.8 times more return on investment than Costco Wholesale. However, NAMCO BANDAI is 1.8 times more volatile than Costco Wholesale Corp. It trades about 0.2 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about -0.08 per unit of risk. If you would invest  2,260  in NAMCO BANDAI HLDG on December 21, 2024 and sell it today you would earn a total of  885.00  from holding NAMCO BANDAI HLDG or generate 39.16% return on investment over 90 days.

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

NAMCO BANDAI HLDG  vs.  Costco Wholesale Corp

NAMCO BANDAI HLDG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NAMCO BANDAI HLDG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, NAMCO BANDAI exhibited solid returns over the last few months and may actually be approaching a breakup point.

Costco Wholesale Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NAMCO BANDAI and Costco Wholesale

The main advantage of trading using opposite NAMCO BANDAI and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NAMCO BANDAI 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 NAMCO BANDAI HLDG 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..