Correlation Between Retail Estates and BJs Wholesale

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

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

Diversification Opportunities for Retail Estates and BJs Wholesale

-0.84

Correlation Coefficient

Retail Estates  BJs Wholesale

Pay attention - limited upside

The 3 months correlation between Retail and BJs is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV 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 Retail Estates 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 Retail Estates NV 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 Retail Estates i.e., Retail Estates and BJs Wholesale go up and down completely randomly.

Pair Corralation between Retail Estates and BJs Wholesale

Assuming the 90 days horizon Retail Estates NV is expected to under-perform the BJs Wholesale. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates NV is 1.57 times less risky than BJs Wholesale. The stock trades about -0.13 of its potential returns per unit of risk. The BJs Wholesale Club is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  7,200  in BJs Wholesale Club on September 2, 2024 and sell it today you would earn a total of  1,850  from holding BJs Wholesale Club or generate 25.69% return on investment over 90 days.

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

Retail Estates NV  vs.  BJs Wholesale Club

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. Despite nearly fragile basic indicators, BJs Wholesale reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Retail Estates and BJs Wholesale

The main advantage of trading using opposite Retail Estates and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates 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 Retail Estates NV 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.