Correlation Between BJs Wholesale and Sociedad Qumica

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

Diversification Opportunities for BJs Wholesale and Sociedad Qumica

0.08

Correlation Coefficient

BJs Wholesale  Sociedad Qumica

Significant diversification

The 3 months correlation between BJs and Sociedad is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Sociedad Qumica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Qumica y 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 Sociedad Qumica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Qumica y has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Sociedad Qumica go up and down completely randomly.

Pair Corralation between BJs Wholesale and Sociedad Qumica

Assuming the 90 days horizon BJs Wholesale Club is expected to under-perform the Sociedad Qumica. But the stock apears to be less risky and, when comparing its historical volatility, BJs Wholesale Club is 1.74 times less risky than Sociedad Qumica. The stock trades about -0.19 of its potential returns per unit of risk. The Sociedad Qumica y is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,680  in Sociedad Qumica y on September 26, 2024 and sell it today you would lose (110.00) from holding Sociedad Qumica y or give up 2.99% of portfolio value over 90 days.

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

BJs Wholesale Club  vs.  Sociedad Qumica y

BJs Wholesale Club

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 14 (%) 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.

Sociedad Qumica y

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sociedad Qumica y has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sociedad Qumica is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BJs Wholesale and Sociedad Qumica

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

The idea behind BJs Wholesale Club and Sociedad Qumica y 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.