Correlation Between Unilever PLC and BJs Wholesale

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

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

Diversification Opportunities for Unilever PLC and BJs Wholesale

0.63

Correlation Coefficient

Unilever PLC  BJs Wholesale

Poor diversification

The 3 months correlation between Unilever and BJs is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR 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 Unilever PLC 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 Unilever PLC ADR 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 Unilever PLC i.e., Unilever PLC and BJs Wholesale go up and down completely randomly.

Pair Corralation between Unilever PLC and BJs Wholesale

Allowing for the 90-day total investment horizon Unilever PLC is expected to generate 6.95 times less return on investment than BJs Wholesale. But when comparing it to its historical volatility, Unilever PLC ADR is 1.85 times less risky than BJs Wholesale. It trades about 0.03 of its potential returns per unit of risk. BJs Wholesale Club is currently generating about 0.12 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  1,605  from holding BJs Wholesale Club or generate 16.99% return on investment over 90 days.

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

Unilever PLC ADR  vs.  BJs Wholesale Club

Unilever PLC ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever PLC ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Unilever PLC is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional 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 9 (%) 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 Unilever PLC and BJs Wholesale

The main advantage of trading using opposite Unilever PLC and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC 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 Unilever PLC ADR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.