Correlation Between Ingles Markets and Costco Wholesale

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

By analyzing existing cross correlation between Ingles Markets Incorporated and Costco Wholesale Corp, you can compare the effects of market volatilities on Ingles Markets 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 Ingles Markets with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ingles Markets and Costco Wholesale.

Diversification Opportunities for Ingles Markets and Costco Wholesale

-0.23

Correlation Coefficient

Ingles Markets  Costco Wholesale

Very good diversification

The 3 months correlation between Ingles and Costco is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ingles Markets Incorporated and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp and Ingles Markets 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 Ingles Markets Incorporated 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 Corp has no effect on the direction of Ingles Markets i.e., Ingles Markets and Costco Wholesale go up and down completely randomly.

Pair Corralation between Ingles Markets and Costco Wholesale

Assuming the 90 days horizon Ingles Markets Incorporated is expected to under-perform the Costco Wholesale. But the stock apears to be less risky and, when comparing its historical volatility, Ingles Markets Incorporated is 1.03 times less risky than Costco Wholesale. The stock trades about -0.02 of its potential returns per unit of risk. The Costco Wholesale Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  47,674  in Costco Wholesale Corp on February 4, 2024 and sell it today you would earn a total of  26,716  from holding Costco Wholesale Corp or generate 56.04% return on investment over 90 days.

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

Ingles Markets Incorporated  vs.  Costco Wholesale Corp

Ingles Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ingles Markets Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Costco Wholesale Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 4 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ingles Markets and Costco Wholesale

The main advantage of trading using opposite Ingles Markets and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ingles Markets 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.

The idea behind Ingles Markets Incorporated and Costco Wholesale Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.