Correlation Between Costco Wholesale and Travelers Companies

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

Diversification Opportunities for Costco Wholesale and Travelers Companies

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Costco and Travelers is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Travelers Companies go up and down completely randomly.

Pair Corralation between Costco Wholesale and Travelers Companies

Given the investment horizon of 90 days Costco Wholesale is expected to under-perform the Travelers Companies. In addition to that, Costco Wholesale is 1.54 times more volatile than The Travelers Companies. It trades about -0.19 of its total potential returns per unit of risk. The Travelers Companies is currently generating about -0.28 per unit of volatility. If you would invest  16,536  in The Travelers Companies on June 30, 2022 and sell it today you would lose (1,244)  from holding The Travelers Companies or give up 7.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Costco Wholesale  vs.  The Travelers Companies

 Performance (%) 
       Timeline  
Costco Wholesale 
Costco Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 2 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Costco Price Channel

The Travelers Companies 
Travelers Performance
0 of 100
Over the last 90 days The Travelers Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Travelers Price Channel

Costco Wholesale and Travelers Companies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Costco Wholesale and Travelers Companies

The main advantage of trading using opposite Costco Wholesale and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.
Costco Wholesale vs. Amazon Inc
The idea behind Costco Wholesale and The Travelers Companies 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.
Travelers Companies 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 CEO Directory module to screen CEOs from public companies around the world.

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