Correlation Between Metalrgica Riosulense and Costco Wholesale

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

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

Diversification Opportunities for Metalrgica Riosulense and Costco Wholesale

-0.41

Correlation Coefficient

Metalrgica Riosulense  Costco Wholesale

Very good diversification

The 3 months correlation between Metalrgica and Costco is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Metalrgica Riosulense SA and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Metalrgica Riosulense 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 Metalrgica Riosulense 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 Metalrgica Riosulense i.e., Metalrgica Riosulense and Costco Wholesale go up and down completely randomly.

Pair Corralation between Metalrgica Riosulense and Costco Wholesale

Assuming the 90 days trading horizon Metalrgica Riosulense SA is expected to generate 0.54 times more return on investment than Costco Wholesale. However, Metalrgica Riosulense SA is 1.86 times less risky than Costco Wholesale. It trades about 0.36 of its potential returns per unit of risk. Costco Wholesale is currently generating about -0.06 per unit of risk. If you would invest  5,499  in Metalrgica Riosulense SA on December 30, 2024 and sell it today you would earn a total of  1,559  from holding Metalrgica Riosulense SA or generate 28.35% return on investment over 90 days.

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

Metalrgica Riosulense SA  vs.  Costco Wholesale

Metalrgica Riosulense

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Metalrgica Riosulense SA are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalrgica Riosulense 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 Metalrgica Riosulense and Costco Wholesale

The main advantage of trading using opposite Metalrgica Riosulense and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalrgica Riosulense 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 Metalrgica Riosulense 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.