Correlation Between BJs Wholesale and Alico

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

Diversification Opportunities for BJs Wholesale and Alico

0.32

Correlation Coefficient

BJs Wholesale  Alico

Weak diversification

The 3 months correlation between BJs and Alico is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Alico Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alico Inc 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 Alico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alico Inc has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Alico go up and down completely randomly.

Pair Corralation between BJs Wholesale and Alico

Allowing for the 90-day total investment horizon BJs Wholesale is expected to generate 1.48 times less return on investment than Alico. But when comparing it to its historical volatility, BJs Wholesale Club is 1.96 times less risky than Alico. It trades about 0.1 of its potential returns per unit of risk. Alico Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,661  in Alico Inc on November 27, 2024 and sell it today you would earn a total of  304.00  from holding Alico Inc or generate 11.42% return on investment over 90 days.

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

BJs Wholesale Club  vs.  Alico Inc

BJs Wholesale Club

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward-looking indicators, BJs Wholesale may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Alico Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alico Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Alico displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Wholesale and Alico

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

The idea behind BJs Wholesale Club and Alico Inc 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.