Correlation Between BJs Wholesale and JAPAN AIRLINES

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

Diversification Opportunities for BJs Wholesale and JAPAN AIRLINES

0.69

Correlation Coefficient

BJs Wholesale  JAPAN AIRLINES

Poor diversification

The 3 months correlation between BJs and JAPAN is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES 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 JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and JAPAN AIRLINES go up and down completely randomly.

Pair Corralation between BJs Wholesale and JAPAN AIRLINES

Assuming the 90 days horizon BJs Wholesale Club is expected to generate 1.82 times more return on investment than JAPAN AIRLINES. However, BJs Wholesale is 1.82 times more volatile than JAPAN AIRLINES. It trades about 0.1 of its potential returns per unit of risk. JAPAN AIRLINES is currently generating about 0.06 per unit of risk. If you would invest  9,000  in BJs Wholesale Club on December 19, 2024 and sell it today you would earn a total of  1,200  from holding BJs Wholesale Club or generate 13.33% return on investment over 90 days.

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

BJs Wholesale Club  vs.  JAPAN AIRLINES

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 7 (%) 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.

JAPAN AIRLINES

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BJs Wholesale and JAPAN AIRLINES

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

The idea behind BJs Wholesale Club and JAPAN AIRLINES 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.