Correlation Between Carvana Co and Costco Wholesale

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

Diversification Opportunities for Carvana Co and Costco Wholesale

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Carvana and Costco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Carvana Co Cl and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Carvana Co 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 Carvana Co Cl 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 Carvana Co i.e., Carvana Co and Costco Wholesale go up and down completely randomly.

Pair Corralation between Carvana Co and Costco Wholesale

Given the investment horizon of 90 days Carvana Co Cl is expected to generate 6.0 times more return on investment than Costco Wholesale. However, Carvana Co is 6.0 times more volatile than Costco Wholesale. It trades about 0.02 of its potential returns per unit of risk. Costco Wholesale is currently generating about -0.16 per unit of risk. If you would invest  2,718  in Carvana Co Cl on June 28, 2022 and sell it today you would lose (274.00)  from holding Carvana Co Cl or give up 10.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Carvana Co Cl  vs.  Costco Wholesale

 Performance (%) 
       Timeline  
Carvana Co Cl 
Carvana Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co Cl are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Carvana Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Carvana Price Channel

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

Carvana Co and Costco Wholesale Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carvana Co and Costco Wholesale

The main advantage of trading using opposite Carvana Co and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carvana Co 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.
Carvana Co vs. Clearwater Paper Corp
The idea behind Carvana Co Cl 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. Kibush Capital Corp
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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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