Correlation Between Kroger and BJs Wholesale

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Can any of the company-specific risk be diversified away by investing in both Kroger 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 Kroger and BJs Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kroger Company and BJs Wholesale Club, you can compare the effects of market volatilities on Kroger 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 Kroger with a short position of BJs Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and BJs Wholesale.

Diversification Opportunities for Kroger and BJs Wholesale

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Kroger and BJs is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company 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 Kroger 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 Kroger Company 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 Kroger i.e., Kroger and BJs Wholesale go up and down completely randomly.

Pair Corralation between Kroger and BJs Wholesale

Allowing for the 90-day total investment horizon Kroger Company is expected to generate 1.25 times more return on investment than BJs Wholesale. However, Kroger is 1.25 times more volatile than BJs Wholesale Club. It trades about 0.16 of its potential returns per unit of risk. BJs Wholesale Club is currently generating about -0.02 per unit of risk. If you would invest  5,222  in Kroger Company on June 23, 2024 and sell it today you would earn a total of  317.00  from holding Kroger Company or generate 6.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Kroger Company  vs.  BJs Wholesale Club

 Performance 
       Timeline  
Kroger Company 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in October 2024.
BJs Wholesale Club 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BJs Wholesale Club has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's forward-looking indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Kroger and BJs Wholesale Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kroger and BJs Wholesale

The main advantage of trading using opposite Kroger and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kroger 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 Kroger Company 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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