Correlation Between BJs Wholesale and United Overseas

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

Diversification Opportunities for BJs Wholesale and United Overseas

0.86

Correlation Coefficient

BJs Wholesale  United Overseas

Very poor diversification

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

Pair Corralation between BJs Wholesale and United Overseas

Assuming the 90 days horizon BJs Wholesale Club is expected to under-perform the United Overseas. In addition to that, BJs Wholesale is 1.37 times more volatile than United Overseas Bank. It trades about -0.19 of its total potential returns per unit of risk. United Overseas Bank is currently generating about -0.05 per unit of volatility. If you would invest  2,555  in United Overseas Bank on September 25, 2024 and sell it today you would lose (24.00) from holding United Overseas Bank or give up 0.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

BJs Wholesale Club  vs.  United Overseas Bank

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.

United Overseas Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Overseas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BJs Wholesale and United Overseas

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

The idea behind BJs Wholesale Club and United Overseas Bank 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.