Correlation Between Pentagon I and Costco Wholesale

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

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

Diversification Opportunities for Pentagon I and Costco Wholesale

-0.64

Correlation Coefficient

Pentagon I  Costco Wholesale

Excellent diversification

The 3 months correlation between Pentagon and Costco is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pentagon I Capital 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 Pentagon I 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 Pentagon I Capital 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 Pentagon I i.e., Pentagon I and Costco Wholesale go up and down completely randomly.

Pair Corralation between Pentagon I and Costco Wholesale

Assuming the 90 days trading horizon Pentagon I Capital is expected to under-perform the Costco Wholesale. In addition to that, Pentagon I is 8.05 times more volatile than Costco Wholesale Corp. It trades about -0.1 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.09 per unit of volatility. If you would invest  4,190  in Costco Wholesale Corp on September 26, 2024 and sell it today you would earn a total of  248.00  from holding Costco Wholesale Corp or generate 5.92% return on investment over 90 days.

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

Pentagon I Capital  vs.  Costco Wholesale Corp

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Costco Wholesale Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 7 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pentagon I and Costco Wholesale

The main advantage of trading using opposite Pentagon I and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentagon I 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 Pentagon I Capital 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.