Correlation Between BJs Wholesale and APPLIED MATERIALS

Can any of the company-specific risk be diversified away by investing in both BJs Wholesale and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS, you can compare the effects of market volatilities on BJs Wholesale and APPLIED MATERIALS 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 APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Wholesale and APPLIED MATERIALS.

Diversification Opportunities for BJs Wholesale and APPLIED MATERIALS

-0.4

Correlation Coefficient

BJs Wholesale  APPLIED MATERIALS

Very good diversification

The 3 months correlation between BJs and APPLIED is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS 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 APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and APPLIED MATERIALS go up and down completely randomly.

Pair Corralation between BJs Wholesale and APPLIED MATERIALS

Assuming the 90 days horizon BJs Wholesale Club is expected to generate 0.87 times more return on investment than APPLIED MATERIALS. However, BJs Wholesale Club is 1.15 times less risky than APPLIED MATERIALS. It trades about 0.11 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about -0.08 per unit of risk. If you would invest  8,800  in BJs Wholesale Club on December 29, 2024 and sell it today you would earn a total of  1,400  from holding BJs Wholesale Club or generate 15.91% return on investment over 90 days.

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

BJs Wholesale Club  vs.  APPLIED MATERIALS

BJs Wholesale Club

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BJs Wholesale reported solid returns over the last few months and may actually be approaching a breakup point.

APPLIED MATERIALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days APPLIED MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BJs Wholesale and APPLIED MATERIALS

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

The idea behind BJs Wholesale Club and APPLIED MATERIALS 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..