Correlation Between Apple and Costco Wholesale

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

Diversification Opportunities for Apple and Costco Wholesale

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Apple and Costco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Apple 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 Apple Inc 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 has no effect on the direction of Apple i.e., Apple and Costco Wholesale go up and down completely randomly.

Pair Corralation between Apple and Costco Wholesale

Given the investment horizon of 90 days Apple Inc is expected to generate 1.15 times more return on investment than Costco Wholesale. However, Apple is 1.15 times more volatile than Costco Wholesale. It trades about -0.01 of its potential returns per unit of risk. Costco Wholesale is currently generating about -0.02 per unit of risk. If you would invest  14,136  in Apple Inc on July 4, 2022 and sell it today you would lose (316.00)  from holding Apple Inc or give up 2.24% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Apple Inc  vs.  Costco Wholesale

 Performance (%) 
       Timeline  
Apple Inc 
Apple Performance
0 of 100
Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Apple is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Apple Price Channel

Costco Wholesale 
Costco Performance
0 of 100
Over the last 90 days Costco Wholesale has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Costco Wholesale is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Costco Price Channel

Apple and Costco Wholesale Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and Costco Wholesale

The main advantage of trading using opposite Apple and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.
Apple vs. Amazon Inc
The idea behind Apple Inc and Costco Wholesale 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.
Costco Wholesale vs. Amazon Inc
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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