Correlation Between BJs Wholesale and Barrett Business

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

Diversification Opportunities for BJs Wholesale and Barrett Business

-0.54

Correlation Coefficient

BJs Wholesale  Barrett Business

Excellent diversification

The 3 months correlation between BJs and Barrett is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Barrett Business Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrett Business Services 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 Barrett Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrett Business Services has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Barrett Business go up and down completely randomly.

Pair Corralation between BJs Wholesale and Barrett Business

Assuming the 90 days horizon BJs Wholesale Club is expected to generate 1.91 times more return on investment than Barrett Business. However, BJs Wholesale is 1.91 times more volatile than Barrett Business Services. It trades about 0.1 of its potential returns per unit of risk. Barrett Business Services is currently generating about -0.12 per unit of risk. If you would invest  8,850  in BJs Wholesale Club on December 27, 2024 and sell it today you would earn a total of  1,150  from holding BJs Wholesale Club or generate 12.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

BJs Wholesale Club  vs.  Barrett Business Services

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 7 (%) 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.

Barrett Business Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Barrett Business Services 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 BJs Wholesale and Barrett Business

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

The idea behind BJs Wholesale Club and Barrett Business Services 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.