Correlation Between BJs Wholesale and Build A
Can any of the company-specific risk be diversified away by investing in both BJs Wholesale and Build A 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 BJs Wholesale and Build A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Wholesale Club and Build A Bear Workshop, you can compare the effects of market volatilities on BJs Wholesale and Build A 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 BJs Wholesale with a short position of Build A. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Wholesale and Build A.
Diversification Opportunities for BJs Wholesale and Build A
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BJs and Build is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Build A Bear Workshop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build A Bear and BJs Wholesale 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 BJs Wholesale Club are associated (or correlated) with Build A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build A Bear has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Build A go up and down completely randomly.
Pair Corralation between BJs Wholesale and Build A
Allowing for the 90-day total investment horizon BJs Wholesale is expected to generate 2.71 times less return on investment than Build A. But when comparing it to its historical volatility, BJs Wholesale Club is 1.63 times less risky than Build A. It trades about 0.03 of its potential returns per unit of risk. Build A Bear Workshop is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,828 in Build A Bear Workshop on February 6, 2024 and sell it today you would earn a total of 1,147 from holding Build A Bear Workshop or generate 62.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
BJs Wholesale Club vs. Build A Bear Workshop
Performance |
| Timeline |
| BJs Wholesale Club |
| Build A Bear |
BJs Wholesale and Build A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Wholesale and Build A
The main advantage of trading using opposite BJs Wholesale and Build A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Wholesale position performs unexpectedly, Build A 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 Build A will offset losses from the drop in Build A's long position.The idea behind BJs Wholesale Club and Build A Bear Workshop 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.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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