Correlation Between Costco Wholesale and Ollies Bargain

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

Diversification Opportunities for Costco Wholesale and Ollies Bargain

0.54

Correlation Coefficient

Costco Wholesale  Ollies Bargain

Very weak diversification

The 3 months correlation between Costco and Ollies is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Ollies Bargain Outlet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ollies Bargain Outlet 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 Ollies Bargain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ollies Bargain Outlet has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Ollies Bargain go up and down completely randomly.

Pair Corralation between Costco Wholesale and Ollies Bargain

Given the investment horizon of 90 days Costco Wholesale is expected to generate 1.27 times less return on investment than Ollies Bargain. But when comparing it to its historical volatility, Costco Wholesale Corp is 1.74 times less risky than Ollies Bargain. It trades about 0.06 of its potential returns per unit of risk. Ollies Bargain Outlet is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,890  in Ollies Bargain Outlet on January 29, 2024 and sell it today you would earn a total of  2,556  from holding Ollies Bargain Outlet or generate 52.27% 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.  Ollies Bargain Outlet

Costco Wholesale Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Costco Wholesale is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ollies Bargain Outlet

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ollies Bargain Outlet are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, Ollies Bargain is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Costco Wholesale and Ollies Bargain

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

The idea behind Costco Wholesale Corp and Ollies Bargain Outlet 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.