Correlation Between BJs Wholesale and CHS

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

Diversification Opportunities for BJs Wholesale and CHS

-0.66

Correlation Coefficient

BJs Wholesale  CHS

Excellent diversification

The 3 months correlation between BJs and CHS is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and CHS Inc CP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc CP 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 CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc CP has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and CHS go up and down completely randomly.

Pair Corralation between BJs Wholesale and CHS

Allowing for the 90-day total investment horizon BJs Wholesale Club is expected to generate 2.17 times more return on investment than CHS. However, BJs Wholesale is 2.17 times more volatile than CHS Inc CP. It trades about 0.21 of its potential returns per unit of risk. CHS Inc CP is currently generating about -0.08 per unit of risk. If you would invest  8,075  in BJs Wholesale Club on September 12, 2024 and sell it today you would earn a total of  1,777  from holding BJs Wholesale Club or generate 22.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

BJs Wholesale Club  vs.  CHS Inc CP

BJs Wholesale Club

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking indicators, BJs Wholesale revealed solid returns over the last few months and may actually be approaching a breakup point.

CHS Inc CP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHS Inc CP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, CHS is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with BJs Wholesale and CHS

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

The idea behind BJs Wholesale Club and CHS Inc CP 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.