Correlation Between Rayonier Advanced and COSTCO WHOLESALE

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

By analyzing existing cross correlation between Rayonier Advanced Materials and COSTCO WHOLESALE CDR, you can compare the effects of market volatilities on Rayonier Advanced 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 Rayonier Advanced with a short position of COSTCO WHOLESALE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rayonier Advanced and COSTCO WHOLESALE.

Diversification Opportunities for Rayonier Advanced and COSTCO WHOLESALE

0.45

Correlation Coefficient

Rayonier Advanced  COSTCO WHOLESALE

Very weak diversification

The 3 months correlation between Rayonier and COSTCO is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials and COSTCO WHOLESALE CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTCO WHOLESALE CDR and Rayonier Advanced 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 Rayonier Advanced Materials 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 CDR has no effect on the direction of Rayonier Advanced i.e., Rayonier Advanced and COSTCO WHOLESALE go up and down completely randomly.

Pair Corralation between Rayonier Advanced and COSTCO WHOLESALE

Assuming the 90 days horizon Rayonier Advanced Materials is expected to under-perform the COSTCO WHOLESALE. In addition to that, Rayonier Advanced is 1.95 times more volatile than COSTCO WHOLESALE CDR. It trades about -0.13 of its total potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about -0.08 per unit of volatility. If you would invest  2,917  in COSTCO WHOLESALE CDR on December 23, 2024 and sell it today you would lose (317.00) from holding COSTCO WHOLESALE CDR or give up 10.87% of portfolio value over 90 days.

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

Rayonier Advanced Materials  vs.  COSTCO WHOLESALE CDR

Rayonier Advanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rayonier Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days COSTCO WHOLESALE CDR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Rayonier Advanced and COSTCO WHOLESALE

The main advantage of trading using opposite Rayonier Advanced and COSTCO WHOLESALE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rayonier Advanced 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 Rayonier Advanced Materials and COSTCO WHOLESALE CDR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.