Correlation Between BJs Wholesale and China Foods

Can any of the company-specific risk be diversified away by investing in both BJs Wholesale and China Foods 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 China Foods 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 China Foods Limited, you can compare the effects of market volatilities on BJs Wholesale and China Foods 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 China Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Wholesale and China Foods.

Diversification Opportunities for BJs Wholesale and China Foods

-0.1

Correlation Coefficient

BJs Wholesale  China Foods

Good diversification

The 3 months correlation between BJs and China is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and China Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Foods Limited 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 China Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Foods Limited has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and China Foods go up and down completely randomly.

Pair Corralation between BJs Wholesale and China Foods

Assuming the 90 days horizon BJs Wholesale Club is expected to under-perform the China Foods. But the stock apears to be less risky and, when comparing its historical volatility, BJs Wholesale Club is 2.17 times less risky than China Foods. The stock trades about -0.14 of its potential returns per unit of risk. The China Foods Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  33.00  in China Foods Limited on April 6, 2025 and sell it today you would earn a total of  1.00  from holding China Foods Limited or generate 3.03% return on investment over 90 days.

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

BJs Wholesale Club  vs.  China Foods Limited

BJs Wholesale Club

Risk-Adjusted Performance

Very Weak

Over the last 90 days BJs Wholesale Club has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

China Foods Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Foods Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, China Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Wholesale and China Foods

The main advantage of trading using opposite BJs Wholesale and China Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Wholesale position performs unexpectedly, China Foods 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 China Foods will offset losses from the drop in China Foods' long position.

The idea behind BJs Wholesale Club and China Foods Limited 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 Stocks Directory module to find actively traded stocks across global markets.