Correlation Between Costco Wholesale and Burlington Stores
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Burlington Stores 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 Costco Wholesale and Burlington Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale Corp and Burlington Stores, you can compare the effects of market volatilities on Costco Wholesale and Burlington Stores 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 Costco Wholesale with a short position of Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Burlington Stores.
Diversification Opportunities for Costco Wholesale and Burlington Stores
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Costco and Burlington is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Costco Wholesale 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 Costco Wholesale Corp are associated (or correlated) with Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Burlington Stores go up and down completely randomly.
Pair Corralation between Costco Wholesale and Burlington Stores
Given the investment horizon of 90 days Costco Wholesale Corp is expected to generate 0.52 times more return on investment than Burlington Stores. However, Costco Wholesale Corp is 1.94 times less risky than Burlington Stores. It trades about 0.05 of its potential returns per unit of risk. Burlington Stores is currently generating about 0.0 per unit of risk. If you would invest 52,569 in Costco Wholesale Corp on January 24, 2024 and sell it today you would earn a total of 18,977 from holding Costco Wholesale Corp or generate 36.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Burlington Stores
Performance |
| Timeline |
| Costco Wholesale Corp |
| Burlington Stores |
Costco Wholesale and Burlington Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Burlington Stores
The main advantage of trading using opposite Costco Wholesale and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Burlington Stores 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 Burlington Stores will offset losses from the drop in Burlington Stores' long position.| Costco Wholesale vs. Big Lots | Costco Wholesale vs. Aquagold International | Costco Wholesale vs. Thrivent High Yield | Costco Wholesale vs. Morningstar Unconstrained Allocation |
| Burlington Stores vs. The TJX Companies | Burlington Stores vs. Guess Inc | Burlington Stores vs. Urban Outfitters | Burlington Stores vs. Childrens Place |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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