Correlation Between Tesla and Costco Wholesale

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

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

Diversification Opportunities for Tesla and Costco Wholesale

0.91

Correlation Coefficient

Tesla  Costco Wholesale

Almost no diversification

The 3 months correlation between Tesla and Costco is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Costco Wholesale go up and down completely randomly.

Pair Corralation between Tesla and Costco Wholesale

Assuming the 90 days trading horizon Tesla Inc is expected to generate 3.28 times more return on investment than Costco Wholesale. However, Tesla is 3.28 times more volatile than Costco Wholesale. It trades about 0.21 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.09 per unit of risk. If you would invest  484,316  in Tesla Inc on September 22, 2024 and sell it today you would earn a total of  370,317  from holding Tesla Inc or generate 76.46% return on investment over 90 days.

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

Tesla Inc  vs.  Costco Wholesale

Tesla Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tesla showed solid returns over the last few months and may actually be approaching a breakup point.

Costco Wholesale

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tesla and Costco Wholesale

The main advantage of trading using opposite Tesla and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.