Correlation Between STEEL DYNAMICS and BJs Wholesale

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

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

Diversification Opportunities for STEEL DYNAMICS and BJs Wholesale

0.16

Correlation Coefficient

STEEL DYNAMICS  BJs Wholesale

Average diversification

The 3 months correlation between STEEL and BJs is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS 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 STEEL DYNAMICS 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 STEEL DYNAMICS 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 STEEL DYNAMICS i.e., STEEL DYNAMICS and BJs Wholesale go up and down completely randomly.

Pair Corralation between STEEL DYNAMICS and BJs Wholesale

Assuming the 90 days trading horizon STEEL DYNAMICS is expected to under-perform the BJs Wholesale. In addition to that, STEEL DYNAMICS is 1.18 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 0.06 per unit of volatility. If you would invest  8,050  in BJs Wholesale Club on October 8, 2024 and sell it today you would earn a total of  450.00  from holding BJs Wholesale Club or generate 5.59% return on investment over 90 days.

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

STEEL DYNAMICS  vs.  BJs Wholesale Club

STEEL DYNAMICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL DYNAMICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, STEEL DYNAMICS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

BJs Wholesale Club

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, BJs Wholesale may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with STEEL DYNAMICS and BJs Wholesale

The main advantage of trading using opposite STEEL DYNAMICS and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL DYNAMICS 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 STEEL DYNAMICS 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.