Correlation Between Costco Wholesale and Big 5

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Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Big 5 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 Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Big 5 Sporting, you can compare the effects of market volatilities on Costco Wholesale and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Big 5.

Diversification Opportunities for Costco Wholesale and Big 5

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Costco and Big 5 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Big 5 go up and down completely randomly.

Pair Corralation between Costco Wholesale and Big 5

Given the investment horizon of 90 days Costco Wholesale is expected to under-perform the Big 5. But the stock apears to be less risky and, when comparing its historical volatility, Costco Wholesale is 3.04 times less risky than Big 5. The stock trades about -0.17 of its potential returns per unit of risk. The Big 5 Sporting is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,102  in Big 5 Sporting on July 6, 2022 and sell it today you would lose (13.00)  from holding Big 5 Sporting or give up 1.18% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Costco Wholesale  vs.  Big 5 Sporting

 Performance (%) 
       Timeline  
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

Big 5 Sporting 
Big 5 Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Big 5 is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Big 5 Price Channel

Costco Wholesale and Big 5 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Costco Wholesale and Big 5

The main advantage of trading using opposite Costco Wholesale and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.
Costco Wholesale vs. Amazon Inc
The idea behind Costco Wholesale and Big 5 Sporting 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.
Big 5 vs. Best Buy Company
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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