Correlation Between BJs Wholesale and Salesforce

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

Diversification Opportunities for BJs Wholesale and Salesforce

0.92

Correlation Coefficient

BJs Wholesale  Salesforce

Almost no diversification

The 3 months correlation between BJs and Salesforce is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Salesforce go up and down completely randomly.

Pair Corralation between BJs Wholesale and Salesforce

Assuming the 90 days horizon BJs Wholesale Club is expected to under-perform the Salesforce. But the stock apears to be less risky and, when comparing its historical volatility, BJs Wholesale Club is 2.26 times less risky than Salesforce. The stock trades about -0.07 of its potential returns per unit of risk. The Salesforce is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  31,223  in Salesforce on September 28, 2024 and sell it today you would earn a total of  1,412  from holding Salesforce or generate 4.52% return on investment over 90 days.

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

BJs Wholesale Club  vs.  Salesforce

BJs Wholesale Club

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BJs Wholesale reported solid returns over the last few months and may actually be approaching a breakup point.

Salesforce

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Wholesale and Salesforce

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

The idea behind BJs Wholesale Club and Salesforce 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.