Correlation Between Advance Auto and BJs Wholesale
Can any of the company-specific risk be diversified away by investing in both Advance Auto 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 Advance Auto and BJs Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and BJs Wholesale Club, you can compare the effects of market volatilities on Advance Auto 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 Advance Auto with a short position of BJs Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and BJs Wholesale.
Diversification Opportunities for Advance Auto and BJs Wholesale
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Advance and BJs is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts 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 Advance Auto 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 Advance Auto Parts 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 Advance Auto i.e., Advance Auto and BJs Wholesale go up and down completely randomly.
Pair Corralation between Advance Auto and BJs Wholesale
Considering the 90-day investment horizon Advance Auto Parts is expected to under-perform the BJs Wholesale. In addition to that, Advance Auto is 1.64 times more volatile than BJs Wholesale Club. It trades about -0.15 of its total potential returns per unit of risk. BJs Wholesale Club is currently generating about 0.04 per unit of volatility. If you would invest 7,493 in BJs Wholesale Club on January 25, 2024 and sell it today you would earn a total of 85.00 from holding BJs Wholesale Club or generate 1.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advance Auto Parts vs. BJs Wholesale Club
Performance |
| Timeline |
| Advance Auto Parts |
| BJs Wholesale Club |
Advance Auto and BJs Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advance Auto and BJs Wholesale
The main advantage of trading using opposite Advance Auto and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto 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.| Advance Auto vs. Target | Advance Auto vs. Lowes Companies | Advance Auto vs. Kohls Corp | Advance Auto vs. Gap Inc |
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Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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