Correlation Between BJs Wholesale and Target
Can any of the company-specific risk be diversified away by investing in both BJs Wholesale and Target 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 Target 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 Target, you can compare the effects of market volatilities on BJs Wholesale and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Wholesale and Target.
Diversification Opportunities for BJs Wholesale and Target
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BJs and Target is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Target go up and down completely randomly.
Pair Corralation between BJs Wholesale and Target
Allowing for the 90-day total investment horizon BJs Wholesale Club is expected to generate 1.48 times more return on investment than Target. However, BJs Wholesale is 1.48 times more volatile than Target. It trades about 0.05 of its potential returns per unit of risk. Target is currently generating about -0.38 per unit of risk. If you would invest 7,464 in BJs Wholesale Club on January 30, 2024 and sell it today you would earn a total of 100.00 from holding BJs Wholesale Club or generate 1.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
BJs Wholesale Club vs. Target
Performance |
Timeline |
BJs Wholesale Club |
Target |
BJs Wholesale and Target Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BJs Wholesale and Target
The main advantage of trading using opposite BJs Wholesale and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Wholesale position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.BJs Wholesale vs. Big Lots | BJs Wholesale vs. Dollar Tree | BJs Wholesale vs. Dicks Sporting Goods | BJs Wholesale vs. Williams Sonoma |
Target vs. Costco Wholesale Corp | Target vs. BJs Wholesale Club | Target vs. Dollar Tree | Target vs. Dollar General |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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