Correlation Between NIKE and Costco Wholesale

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

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

Diversification Opportunities for NIKE and Costco Wholesale

-0.16

Correlation Coefficient

NIKE  Costco Wholesale

Good diversification

The 3 months correlation between NIKE and Costco is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and NIKE 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 NIKE Inc 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 has no effect on the direction of NIKE i.e., NIKE and Costco Wholesale go up and down completely randomly.

Pair Corralation between NIKE and Costco Wholesale

Assuming the 90 days trading horizon NIKE is expected to generate 17.52 times less return on investment than Costco Wholesale. In addition to that, NIKE is 1.43 times more volatile than Costco Wholesale. It trades about 0.01 of its total potential returns per unit of risk. Costco Wholesale is currently generating about 0.18 per unit of volatility. If you would invest  1,727,710  in Costco Wholesale on September 18, 2024 and sell it today you would earn a total of  297,440  from holding Costco Wholesale or generate 17.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

NIKE Inc  vs.  Costco Wholesale

NIKE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIKE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, NIKE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Costco Wholesale

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Costco Wholesale showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NIKE and Costco Wholesale

The main advantage of trading using opposite NIKE and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIKE 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 NIKE Inc and Costco Wholesale 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.