Correlation Between Costco Wholesale and ALEFARM BREWING

Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and ALEFARM BREWING 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 ALEFARM BREWING into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Costco Wholesale Corp and ALEFARM BREWING DK 05, you can compare the effects of market volatilities on Costco Wholesale and ALEFARM BREWING 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 ALEFARM BREWING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and ALEFARM BREWING.

Diversification Opportunities for Costco Wholesale and ALEFARM BREWING

0.63

Correlation Coefficient

Costco Wholesale  ALEFARM BREWING

Poor diversification

The 3 months correlation between Costco and ALEFARM is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and ALEFARM BREWING DK 05 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALEFARM BREWING DK 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 Corp are associated (or correlated) with ALEFARM BREWING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALEFARM BREWING DK has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and ALEFARM BREWING go up and down completely randomly.

Pair Corralation between Costco Wholesale and ALEFARM BREWING

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.23 times more return on investment than ALEFARM BREWING. However, Costco Wholesale Corp is 4.38 times less risky than ALEFARM BREWING. It trades about -0.06 of its potential returns per unit of risk. ALEFARM BREWING DK 05 is currently generating about -0.03 per unit of risk. If you would invest  85,489  in Costco Wholesale Corp on April 20, 2025 and sell it today you would lose (3,399) from holding Costco Wholesale Corp or give up 3.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Costco Wholesale Corp  vs.  ALEFARM BREWING DK 05

Costco Wholesale Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Costco Wholesale is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

ALEFARM BREWING DK

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALEFARM BREWING DK 05 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Costco Wholesale and ALEFARM BREWING

The main advantage of trading using opposite Costco Wholesale and ALEFARM BREWING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, ALEFARM BREWING 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 ALEFARM BREWING will offset losses from the drop in ALEFARM BREWING's long position.

The idea behind Costco Wholesale Corp and ALEFARM BREWING DK 05 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.

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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 the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.