Correlation Between Costco Wholesale and British Amer
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and British Amer 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 British Amer 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 British American Tobacco, you can compare the effects of market volatilities on Costco Wholesale and British Amer 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 British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and British Amer.
Diversification Opportunities for Costco Wholesale and British Amer
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Costco and British is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and British Amer go up and down completely randomly.
Pair Corralation between Costco Wholesale and British Amer
Given the investment horizon of 90 days Costco Wholesale Corp is expected to generate 1.04 times more return on investment than British Amer. However, Costco Wholesale is 1.04 times more volatile than British American Tobacco. It trades about 0.09 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.09 per unit of risk. If you would invest 69,395 in Costco Wholesale Corp on December 20, 2023 and sell it today you would earn a total of 3,759 from holding Costco Wholesale Corp or generate 5.42% 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. British American Tobacco
Performance |
Timeline |
Costco Wholesale Corp |
British American Tobacco |
Costco Wholesale and British Amer Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Costco Wholesale and British Amer
The main advantage of trading using opposite Costco Wholesale and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, British Amer 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 British Amer will offset losses from the drop in British Amer's long position.Costco Wholesale vs. El Pollo Loco | Costco Wholesale vs. Toro Co | Costco Wholesale vs. Wingstop | Costco Wholesale vs. Summit Hotel Properties |
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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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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