Correlation Between Six Flags and Costco Wholesale

Can any of the company-specific risk be diversified away by investing in both Six Flags 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 Six Flags and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Six Flags Entertainment and Costco Wholesale Corp, you can compare the effects of market volatilities on Six Flags 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 Six Flags with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Six Flags and Costco Wholesale.

Diversification Opportunities for Six Flags and Costco Wholesale

0.37

Correlation Coefficient

Six Flags  Costco Wholesale

Weak diversification

The 3 months correlation between Six and Costco is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Six Flags Entertainment 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 Six Flags 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 Six Flags Entertainment 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 Six Flags i.e., Six Flags and Costco Wholesale go up and down completely randomly.

Pair Corralation between Six Flags and Costco Wholesale

Considering the 90-day investment horizon Six Flags Entertainment is expected to under-perform the Costco Wholesale. In addition to that, Six Flags is 1.77 times more volatile than Costco Wholesale Corp. It trades about -0.2 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about -0.12 per unit of volatility. If you would invest  73,096  in Costco Wholesale Corp on January 24, 2024 and sell it today you would lose (1,550) from holding Costco Wholesale Corp or give up 2.12% of portfolio value over 90 days.

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

Six Flags Entertainment  vs.  Costco Wholesale Corp

Six Flags Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Six Flags Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Six Flags is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Costco Wholesale Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 4 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Six Flags and Costco Wholesale

The main advantage of trading using opposite Six Flags and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Six Flags 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 Six Flags Entertainment 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.