Correlation Between Natural Health and BJs Wholesale

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

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

Diversification Opportunities for Natural Health and BJs Wholesale

0.36

Correlation Coefficient

Natural Health  BJs Wholesale

Weak diversification

The 3 months correlation between Natural and BJs is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends 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 Natural Health 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 Natural Health Trends 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 Natural Health i.e., Natural Health and BJs Wholesale go up and down completely randomly.

Pair Corralation between Natural Health and BJs Wholesale

Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the BJs Wholesale. In addition to that, Natural Health is 2.16 times more volatile than BJs Wholesale Club. It trades about -0.03 of its total potential returns per unit of risk. BJs Wholesale Club is currently generating about 0.11 per unit of volatility. If you would invest  9,050  in BJs Wholesale Club on November 29, 2024 and sell it today you would earn a total of  850.00  from holding BJs Wholesale Club or generate 9.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Natural Health Trends  vs.  BJs Wholesale Club

Natural Health Trends

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natural Health Trends has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators 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

Modest

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. Despite nearly fragile basic indicators, BJs Wholesale may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Natural Health and BJs Wholesale

The main advantage of trading using opposite Natural Health and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Health 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 Natural Health Trends 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.