Correlation Between BJs Wholesale and Aon PLC

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

Diversification Opportunities for BJs Wholesale and Aon PLC

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between BJs and Aon is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and BJs 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 BJs Wholesale Club are associated (or correlated) with Aon PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aon PLC has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Aon PLC go up and down completely randomly.

Pair Corralation between BJs Wholesale and Aon PLC

Assuming the 90 days horizon BJs Wholesale Club is expected to generate 1.25 times more return on investment than Aon PLC. However, BJs Wholesale is 1.25 times more volatile than Aon PLC. It trades about 0.05 of its potential returns per unit of risk. Aon PLC is currently generating about 0.03 per unit of risk. If you would invest  6,250  in BJs Wholesale Club on October 10, 2024 and sell it today you would earn a total of  2,250  from holding BJs Wholesale Club or generate 36.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

BJs Wholesale Club  vs.  Aon PLC

 Performance 
       Timeline  
BJs Wholesale Club 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BJs Wholesale may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Aon PLC 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Aon PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aon PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BJs Wholesale and Aon PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BJs Wholesale and Aon PLC

The main advantage of trading using opposite BJs Wholesale and Aon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Wholesale position performs unexpectedly, Aon PLC 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 Aon PLC will offset losses from the drop in Aon PLC's long position.
The idea behind BJs Wholesale Club and Aon PLC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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