Correlation Between BJs Wholesale and STORE ELECTRONIC

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

Diversification Opportunities for BJs Wholesale and STORE ELECTRONIC

0.03

Correlation Coefficient

BJs Wholesale  STORE ELECTRONIC

Significant diversification

The 3 months correlation between BJs and STORE is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and STORE ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORE ELECTRONIC 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 STORE ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORE ELECTRONIC has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and STORE ELECTRONIC go up and down completely randomly.

Pair Corralation between BJs Wholesale and STORE ELECTRONIC

Assuming the 90 days horizon BJs Wholesale Club is expected to under-perform the STORE ELECTRONIC. But the stock apears to be less risky and, when comparing its historical volatility, BJs Wholesale Club is 2.84 times less risky than STORE ELECTRONIC. The stock trades about -0.19 of its potential returns per unit of risk. The STORE ELECTRONIC is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  13,450  in STORE ELECTRONIC on October 11, 2024 and sell it today you would earn a total of  3,170  from holding STORE ELECTRONIC or generate 23.57% 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.  STORE ELECTRONIC

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.

STORE ELECTRONIC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STORE ELECTRONIC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, STORE ELECTRONIC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Wholesale and STORE ELECTRONIC

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

The idea behind BJs Wholesale Club and STORE ELECTRONIC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.