Correlation Between BJs Wholesale and EMPLOYERS HLDGS

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

Diversification Opportunities for BJs Wholesale and EMPLOYERS HLDGS

0.88

Correlation Coefficient

BJs Wholesale  EMPLOYERS HLDGS

Very poor diversification

The 3 months correlation between BJs and EMPLOYERS is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and EMPLOYERS HLDGS DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMPLOYERS HLDGS DL 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 EMPLOYERS HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMPLOYERS HLDGS DL has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and EMPLOYERS HLDGS go up and down completely randomly.

Pair Corralation between BJs Wholesale and EMPLOYERS HLDGS

Assuming the 90 days horizon BJs Wholesale Club is expected to generate 3.01 times more return on investment than EMPLOYERS HLDGS. However, BJs Wholesale is 3.01 times more volatile than EMPLOYERS HLDGS DL. It trades about 0.24 of its potential returns per unit of risk. EMPLOYERS HLDGS DL is currently generating about 0.0 per unit of risk. If you would invest  8,150  in BJs Wholesale Club on September 17, 2024 and sell it today you would earn a total of  1,050  from holding BJs Wholesale Club or generate 12.88% 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.  EMPLOYERS HLDGS DL

BJs Wholesale Club

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 18 (%) 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.

EMPLOYERS HLDGS DL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMPLOYERS HLDGS DL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, EMPLOYERS HLDGS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Wholesale and EMPLOYERS HLDGS

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

The idea behind BJs Wholesale Club and EMPLOYERS HLDGS DL 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.