Correlation Between Rathdowney Resources and Costco Wholesale

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

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

Diversification Opportunities for Rathdowney Resources and Costco Wholesale

-0.14

Correlation Coefficient

Rathdowney Resources  Costco Wholesale

Good diversification

The 3 months correlation between Rathdowney and Costco is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Rathdowney Resources 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 Rathdowney Resources 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 Rathdowney Resources 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 Rathdowney Resources i.e., Rathdowney Resources and Costco Wholesale go up and down completely randomly.

Pair Corralation between Rathdowney Resources and Costco Wholesale

Assuming the 90 days horizon Rathdowney Resources is expected to generate 12.12 times more return on investment than Costco Wholesale. However, Rathdowney Resources is 12.12 times more volatile than Costco Wholesale Corp. It trades about 0.05 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.17 per unit of risk. If you would invest  3.00  in Rathdowney Resources on September 14, 2024 and sell it today you would lose (1.00) from holding Rathdowney Resources or give up 33.33% of portfolio value over 90 days.

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

Rathdowney Resources  vs.  Costco Wholesale Corp

Rathdowney Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rathdowney Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Rathdowney Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Costco Wholesale Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rathdowney Resources and Costco Wholesale

The main advantage of trading using opposite Rathdowney Resources and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rathdowney Resources 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 Rathdowney Resources 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.