Correlation Between BJs Wholesale and SBM OFFSHORE

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

Diversification Opportunities for BJs Wholesale and SBM OFFSHORE

0.45

Correlation Coefficient

BJs Wholesale  SBM OFFSHORE

Very weak diversification

The 3 months correlation between BJs and SBM is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between BJs Wholesale and SBM OFFSHORE

Assuming the 90 days horizon BJs Wholesale is expected to generate 2.65 times less return on investment than SBM OFFSHORE. But when comparing it to its historical volatility, BJs Wholesale Club is 1.23 times less risky than SBM OFFSHORE. It trades about 0.07 of its potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,676  in SBM OFFSHORE on December 3, 2024 and sell it today you would earn a total of  299.00  from holding SBM OFFSHORE or generate 17.84% return on investment over 90 days.

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

BJs Wholesale Club  vs.  SBM OFFSHORE

BJs Wholesale Club

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, BJs Wholesale may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SBM OFFSHORE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, SBM OFFSHORE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Wholesale and SBM OFFSHORE

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

The idea behind BJs Wholesale Club and SBM OFFSHORE 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.