Correlation Between Singapore Airlines and Costco Wholesale

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

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

Diversification Opportunities for Singapore Airlines and Costco Wholesale

-0.1

Correlation Coefficient

Singapore Airlines  Costco Wholesale

Good diversification

The 3 months correlation between Singapore and Costco is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines Limited 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 Singapore Airlines 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 Singapore Airlines Limited 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 Singapore Airlines i.e., Singapore Airlines and Costco Wholesale go up and down completely randomly.

Pair Corralation between Singapore Airlines and Costco Wholesale

Assuming the 90 days trading horizon Singapore Airlines is expected to generate 4.03 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, Singapore Airlines Limited is 1.0 times less risky than Costco Wholesale. It trades about 0.05 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  82,201  in Costco Wholesale Corp on September 12, 2024 and sell it today you would earn a total of  13,519  from holding Costco Wholesale Corp or generate 16.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Singapore Airlines Limited  vs.  Costco Wholesale Corp

Singapore Airlines

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Singapore Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Costco Wholesale Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Costco Wholesale displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singapore Airlines and Costco Wholesale

The main advantage of trading using opposite Singapore Airlines and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Airlines 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 Singapore Airlines Limited 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.