Correlation Between Build A and BJs Wholesale

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

Diversification Opportunities for Build A and BJs Wholesale

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Build and BJs is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Build-A-Bear Workshop 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 Build A 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 Build A Bear Workshop 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 Build A i.e., Build A and BJs Wholesale go up and down completely randomly.

Pair Corralation between Build A and BJs Wholesale

Considering the 90-day investment horizon Build A Bear Workshop is expected to generate 1.33 times more return on investment than BJs Wholesale. However, Build A is 1.33 times more volatile than BJs Wholesale Club. It trades about 0.29 of its potential returns per unit of risk. BJs Wholesale Club is currently generating about 0.1 per unit of risk. If you would invest  2,386  in Build A Bear Workshop on December 29, 2023 and sell it today you would earn a total of  587.00  from holding Build A Bear Workshop or generate 24.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Build-A-Bear Workshop  vs.  BJs Wholesale Club

 Performance 
       Timeline  
Build-A-Bear Workshop 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Build A Bear Workshop are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Build A showed solid returns over the last few months and may actually be approaching a breakup point.
BJs Wholesale Club 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward-looking indicators, BJs Wholesale revealed solid returns over the last few months and may actually be approaching a breakup point.

Build A and BJs Wholesale Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Build A and BJs Wholesale

The main advantage of trading using opposite Build A and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A 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 Build A Bear Workshop 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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