Correlation Between BJs Wholesale and Dollarama

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

Diversification Opportunities for BJs Wholesale and Dollarama

0.73

Correlation Coefficient

BJs Wholesale  Dollarama

Poor diversification

The 3 months correlation between BJs and Dollarama is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama 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 Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Dollarama go up and down completely randomly.

Pair Corralation between BJs Wholesale and Dollarama

Allowing for the 90-day total investment horizon BJs Wholesale Club is expected to generate 1.88 times more return on investment than Dollarama. However, BJs Wholesale is 1.88 times more volatile than Dollarama. It trades about 0.17 of its potential returns per unit of risk. Dollarama is currently generating about 0.13 per unit of risk. If you would invest  8,960  in BJs Wholesale Club on December 28, 2024 and sell it today you would earn a total of  2,231  from holding BJs Wholesale Club or generate 24.9% return on investment over 90 days.

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

BJs Wholesale Club  vs.  Dollarama

BJs Wholesale Club

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 13 (%) 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.

Dollarama

Risk-Adjusted Performance

OK

Over the last 90 days Dollarama has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Dollarama may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BJs Wholesale and Dollarama

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

The idea behind BJs Wholesale Club and Dollarama 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.