Correlation Between Costco Wholesale and Capstone Mining

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

Diversification Opportunities for Costco Wholesale and Capstone Mining

0.08

Correlation Coefficient

Costco Wholesale  Capstone Mining

Significant diversification

The 3 months correlation between Costco and Capstone is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Capstone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Mining Corp 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 Capstone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Mining Corp has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Capstone Mining go up and down completely randomly.

Pair Corralation between Costco Wholesale and Capstone Mining

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to under-perform the Capstone Mining. But the stock apears to be less risky and, when comparing its historical volatility, Costco Wholesale Corp is 2.08 times less risky than Capstone Mining. The stock trades about -0.06 of its potential returns per unit of risk. The Capstone Mining Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  820.00  in Capstone Mining Corp on January 26, 2024 and sell it today you would earn a total of  84.00  from holding Capstone Mining Corp or generate 10.24% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Capstone Mining Corp

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 rather sound basic indicators, Costco Wholesale is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Capstone Mining Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Mining Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Capstone Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and Capstone Mining

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

The idea behind Costco Wholesale Corp and Capstone Mining 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.