Correlation Between BJs Wholesale and State Bank

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

Diversification Opportunities for BJs Wholesale and State Bank

0.86

Correlation Coefficient

BJs Wholesale  State Bank

Very poor diversification

The 3 months correlation between BJs and State is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and State Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Bank 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 State Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Bank has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and State Bank go up and down completely randomly.

Pair Corralation between BJs Wholesale and State Bank

Assuming the 90 days horizon BJs Wholesale is expected to generate 1.07 times less return on investment than State Bank. But when comparing it to its historical volatility, BJs Wholesale Club is 1.07 times less risky than State Bank. It trades about 0.05 of its potential returns per unit of risk. State Bank of is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,342  in State Bank of on September 23, 2024 and sell it today you would earn a total of  3,008  from holding State Bank of or generate 47.43% return on investment over 90 days.

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

BJs Wholesale Club  vs.  State Bank of

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.

State Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BJs Wholesale and State Bank

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

The idea behind BJs Wholesale Club and State Bank of 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.