Correlation Between BJs Wholesale and Berkshire Hathaway

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

Diversification Opportunities for BJs Wholesale and Berkshire Hathaway

0.83

Correlation Coefficient

BJs Wholesale  Berkshire Hathaway

Very poor diversification

The 3 months correlation between BJs and Berkshire is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway 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 Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between BJs Wholesale and Berkshire Hathaway

Assuming the 90 days horizon BJs Wholesale Club is expected to generate 1.62 times more return on investment than Berkshire Hathaway. However, BJs Wholesale is 1.62 times more volatile than Berkshire Hathaway. It trades about 0.1 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.11 per unit of risk. If you would invest  5,950  in BJs Wholesale Club on September 23, 2024 and sell it today you would earn a total of  3,000  from holding BJs Wholesale Club or generate 50.42% return on investment over 90 days.

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

BJs Wholesale Club  vs.  Berkshire Hathaway

BJs Wholesale Club

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 14 (%) 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.

Berkshire Hathaway

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BJs Wholesale and Berkshire Hathaway

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

The idea behind BJs Wholesale Club and Berkshire Hathaway 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.