Correlation Between Costco Wholesale and Ag Growth

Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Ag Growth 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 Ag Growth 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 Ag Growth International, you can compare the effects of market volatilities on Costco Wholesale and Ag Growth 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 Ag Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Ag Growth.

Diversification Opportunities for Costco Wholesale and Ag Growth

-0.76

Correlation Coefficient

Costco Wholesale  Ag Growth

Pay attention - limited upside

The 3 months correlation between Costco and AFN is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Ag Growth International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ag Growth International 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 Ag Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ag Growth International has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Ag Growth go up and down completely randomly.

Pair Corralation between Costco Wholesale and Ag Growth

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.35 times more return on investment than Ag Growth. However, Costco Wholesale Corp is 2.85 times less risky than Ag Growth. It trades about 0.25 of its potential returns per unit of risk. Ag Growth International is currently generating about -0.08 per unit of risk. If you would invest  3,424  in Costco Wholesale Corp on March 14, 2024 and sell it today you would earn a total of  538.00  from holding Costco Wholesale Corp or generate 15.71% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Ag Growth International

Costco Wholesale Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Costco Wholesale exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ag Growth International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ag Growth International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Costco Wholesale and Ag Growth

The main advantage of trading using opposite Costco Wholesale and Ag Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Ag Growth 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 Ag Growth will offset losses from the drop in Ag Growth's long position.

The idea behind Costco Wholesale Corp and Ag Growth International 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.