Correlation Between Rite Aid and Costco Wholesale

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Can any of the company-specific risk be diversified away by investing in both Rite Aid 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 Rite Aid and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rite Aid and Costco Wholesale Corp, you can compare the effects of market volatilities on Rite Aid 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 Rite Aid with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rite Aid and Costco Wholesale.

Diversification Opportunities for Rite Aid and Costco Wholesale

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Rite and Costco is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Rite Aid 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 Rite Aid 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 Rite Aid 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 Rite Aid i.e., Rite Aid and Costco Wholesale go up and down completely randomly.

Pair Corralation between Rite Aid and Costco Wholesale

Considering the 90-day investment horizon Rite Aid is expected to under-perform the Costco Wholesale. In addition to that, Rite Aid is 6.12 times more volatile than Costco Wholesale Corp. It trades about -0.06 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.08 per unit of volatility. If you would invest  45,554  in Costco Wholesale Corp on December 29, 2023 and sell it today you would earn a total of  27,371  from holding Costco Wholesale Corp or generate 60.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy84.84%
ValuesDaily Returns

Rite Aid  vs.  Costco Wholesale Corp

 Performance 
       Timeline  
Rite Aid 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Rite Aid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Rite Aid is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
Costco Wholesale Corp 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Rite Aid and Costco Wholesale Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rite Aid and Costco Wholesale

The main advantage of trading using opposite Rite Aid and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rite Aid 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 Rite Aid 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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