Correlation Between BJs Wholesale and Burlington Stores

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

Diversification Opportunities for BJs Wholesale and Burlington Stores

-0.75

Correlation Coefficient

BJs Wholesale  Burlington Stores

Pay attention - limited upside

The 3 months correlation between BJs and Burlington is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores 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 Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Burlington Stores go up and down completely randomly.

Pair Corralation between BJs Wholesale and Burlington Stores

Assuming the 90 days horizon BJs Wholesale Club is expected to generate 0.8 times more return on investment than Burlington Stores. However, BJs Wholesale Club is 1.25 times less risky than Burlington Stores. It trades about 0.11 of its potential returns per unit of risk. Burlington Stores is currently generating about -0.1 per unit of risk. If you would invest  8,800  in BJs Wholesale Club on December 30, 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	Weak
Accuracy	100.0%
Values	Daily Returns

BJs Wholesale Club  vs.  Burlington Stores

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.

Burlington Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burlington Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile 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 Burlington Stores

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

The idea behind BJs Wholesale Club and Burlington Stores 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.