Correlation Between Dicks Sporting and BJs Wholesale

Can any of the company-specific risk be diversified away by investing in both Dicks Sporting and BJs Wholesale 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 Dicks Sporting and BJs Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dicks Sporting Goods and BJs Wholesale Club, you can compare the effects of market volatilities on Dicks Sporting and BJs Wholesale 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 Dicks Sporting with a short position of BJs Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dicks Sporting and BJs Wholesale.

Diversification Opportunities for Dicks Sporting and BJs Wholesale

-0.45

Correlation Coefficient

Dicks Sporting  BJs Wholesale

Very good diversification

The 3 months correlation between Dicks and BJs is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and BJs Wholesale Club in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Wholesale Club and Dicks Sporting 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 Dicks Sporting Goods are associated (or correlated) with BJs Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Wholesale Club has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and BJs Wholesale go up and down completely randomly.

Pair Corralation between Dicks Sporting and BJs Wholesale

Considering the 90-day investment horizon Dicks Sporting Goods is expected to under-perform the BJs Wholesale. But the stock apears to be less risky and, when comparing its historical volatility, Dicks Sporting Goods is 1.07 times less risky than BJs Wholesale. The stock trades about -0.08 of its potential returns per unit of risk. The BJs Wholesale Club is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,444  in BJs Wholesale Club on December 26, 2024 and sell it today you would earn a total of  1,504  from holding BJs Wholesale Club or generate 15.93% return on investment over 90 days.

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

Dicks Sporting Goods  vs.  BJs Wholesale Club

Dicks Sporting Goods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dicks Sporting Goods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 8 (%) 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.

Pair Trading with Dicks Sporting and BJs Wholesale

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

The idea behind Dicks Sporting Goods and BJs Wholesale Club 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.