Correlation Between PDG Realty and Costco Wholesale

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

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

Diversification Opportunities for PDG Realty and Costco Wholesale

0.16

Correlation Coefficient

PDG Realty  Costco Wholesale

Average diversification

The 3 months correlation between PDG and Costco is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding PDG Realty SA and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and PDG Realty 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 PDG Realty SA 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 PDG Realty i.e., PDG Realty and Costco Wholesale go up and down completely randomly.

Pair Corralation between PDG Realty and Costco Wholesale

Assuming the 90 days trading horizon PDG Realty SA is expected to generate 61.52 times more return on investment than Costco Wholesale. However, PDG Realty is 61.52 times more volatile than Costco Wholesale. It trades about 0.13 of its potential returns per unit of risk. Costco Wholesale is currently generating about -0.06 per unit of risk. If you would invest  125.00  in PDG Realty SA on December 30, 2024 and sell it today you would lose (50.00) from holding PDG Realty SA or give up 40.0% of portfolio value over 90 days.

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

PDG Realty SA  vs.  Costco Wholesale

PDG Realty SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PDG Realty SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PDG Realty unveiled solid returns over the last few months and may actually be approaching a breakup point.

Costco Wholesale

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PDG Realty and Costco Wholesale

The main advantage of trading using opposite PDG Realty and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PDG Realty 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 PDG Realty SA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.