Correlation Between BJs Wholesale and SP Global

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

Diversification Opportunities for BJs Wholesale and SP Global

0.63

Correlation Coefficient

BJs Wholesale  SP Global

Poor diversification

The 3 months correlation between BJs and MHL is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Global 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 SP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Global has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and SP Global go up and down completely randomly.

Pair Corralation between BJs Wholesale and SP Global

Assuming the 90 days horizon BJs Wholesale is expected to generate 1.02 times less return on investment than SP Global. In addition to that, BJs Wholesale is 1.3 times more volatile than SP Global. It trades about 0.04 of its total potential returns per unit of risk. SP Global is currently generating about 0.06 per unit of volatility. If you would invest  34,843  in SP Global on October 24, 2024 and sell it today you would earn a total of  13,877  from holding SP Global or generate 39.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

BJs Wholesale Club  vs.  SP Global

BJs Wholesale Club

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 11 (%) 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.

SP Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SP Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SP Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BJs Wholesale and SP Global

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

The idea behind BJs Wholesale Club and SP Global 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.