Correlation Between BJs Wholesale and JAPAN TOBACCO

Can any of the company-specific risk be diversified away by investing in both BJs Wholesale and JAPAN TOBACCO 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 TOBACCO 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 TOBACCO UNSPADR12, you can compare the effects of market volatilities on BJs Wholesale and JAPAN TOBACCO 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 TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Wholesale and JAPAN TOBACCO.

Diversification Opportunities for BJs Wholesale and JAPAN TOBACCO

0.17

Correlation Coefficient

BJs Wholesale  JAPAN TOBACCO

Average diversification

The 3 months correlation between BJs and JAPAN is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 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 TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and JAPAN TOBACCO go up and down completely randomly.

Pair Corralation between BJs Wholesale and JAPAN TOBACCO

Assuming the 90 days horizon BJs Wholesale is expected to generate 1.08 times less return on investment than JAPAN TOBACCO. In addition to that, BJs Wholesale is 1.01 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.05 of its total potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.05 per unit of volatility. If you would invest  824.00  in JAPAN TOBACCO UNSPADR12 on October 4, 2024 and sell it today you would earn a total of  356.00  from holding JAPAN TOBACCO UNSPADR12 or generate 43.2% return on investment over 90 days.

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

BJs Wholesale Club  vs.  JAPAN TOBACCO UNSPADR12

BJs Wholesale Club

Risk-Adjusted Performance

8 of 100

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 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAPAN TOBACCO UNSPADR12 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BJs Wholesale and JAPAN TOBACCO

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

The idea behind BJs Wholesale Club and JAPAN TOBACCO UNSPADR12 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.