Correlation Between BJs Wholesale and Consumer Products

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

Diversification Opportunities for BJs Wholesale and Consumer Products

0.28

Correlation Coefficient

BJs Wholesale  Consumer Products

Modest diversification

The 3 months correlation between BJs and Consumer is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Consumer Products Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Products 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 Consumer Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Products has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Consumer Products go up and down completely randomly.

Pair Corralation between BJs Wholesale and Consumer Products

Allowing for the 90-day total investment horizon BJs Wholesale is expected to generate 191.99 times less return on investment than Consumer Products. But when comparing it to its historical volatility, BJs Wholesale Club is 38.64 times less risky than Consumer Products. It trades about 0.05 of its potential returns per unit of risk. Consumer Products Fund is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,841  in Consumer Products Fund on November 28, 2024 and sell it today you would earn a total of  7,789  from holding Consumer Products Fund or generate 202.79% 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.  Consumer Products Fund

BJs Wholesale Club

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady forward-looking indicators, BJs Wholesale is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Consumer Products

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Products Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Consumer Products showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Wholesale and Consumer Products

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

The idea behind BJs Wholesale Club and Consumer Products Fund 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..