Correlation Between Costco Wholesale and Federated Mdt

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

Diversification Opportunities for Costco Wholesale and Federated Mdt

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Costco and Federated is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Federated Mdt Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Small 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 Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Small has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Federated Mdt go up and down completely randomly.

Pair Corralation between Costco Wholesale and Federated Mdt

Given the investment horizon of 90 days Costco Wholesale is expected to under-perform the Federated Mdt. In addition to that, Costco Wholesale is 1.04 times more volatile than Federated Mdt Small. It trades about -0.27 of its total potential returns per unit of risk. Federated Mdt Small is currently generating about -0.23 per unit of volatility. If you would invest  1,988  in Federated Mdt Small on July 3, 2022 and sell it today you would lose (179.00)  from holding Federated Mdt Small or give up 9.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Costco Wholesale  vs.  Federated Mdt Small

 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

Federated Mdt Small 
Federated Performance
0 of 100
Over the last 90 days Federated Mdt Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Federated Mdt is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Federated Price Channel

Costco Wholesale and Federated Mdt Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Costco Wholesale and Federated Mdt

The main advantage of trading using opposite Costco Wholesale and Federated Mdt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Federated Mdt 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 Federated Mdt will offset losses from the drop in Federated Mdt's long position.
Costco Wholesale vs. Amazon Inc
The idea behind Costco Wholesale and Federated Mdt Small 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.
Federated Mdt vs. 3M 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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