Correlation Between Costco Wholesale and Macys
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Macys 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 Macys 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 Macys Inc, you can compare the effects of market volatilities on Costco Wholesale and Macys 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 Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Macys.
Diversification Opportunities for Costco Wholesale and Macys
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Costco and Macys is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc 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 Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Macys go up and down completely randomly.
Pair Corralation between Costco Wholesale and Macys
Given the investment horizon of 90 days Costco Wholesale Corp is expected to generate 0.46 times more return on investment than Macys. However, Costco Wholesale Corp is 2.19 times less risky than Macys. It trades about 0.06 of its potential returns per unit of risk. Macys Inc is currently generating about 0.01 per unit of risk. If you would invest 49,951 in Costco Wholesale Corp on January 25, 2024 and sell it today you would earn a total of 22,317 from holding Costco Wholesale Corp or generate 44.68% 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. Macys Inc
Performance |
Timeline |
Costco Wholesale Corp |
Macys Inc |
Costco Wholesale and Macys Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Costco Wholesale and Macys
The main advantage of trading using opposite Costco Wholesale and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Macys 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 Macys will offset losses from the drop in Macys' long position.Costco Wholesale vs. Big Lots | Costco Wholesale vs. Aquagold International | Costco Wholesale vs. Thrivent High Yield | Costco Wholesale vs. Morningstar Unconstrained Allocation |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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