Correlation Between BJs Wholesale and Advance Auto
Can any of the company-specific risk be diversified away by investing in both BJs Wholesale and Advance Auto 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 Advance Auto 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 Advance Auto Parts, you can compare the effects of market volatilities on BJs Wholesale and Advance Auto 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 Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Wholesale and Advance Auto.
Diversification Opportunities for BJs Wholesale and Advance Auto
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BJs and Advance is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts 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 Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Advance Auto go up and down completely randomly.
Pair Corralation between BJs Wholesale and Advance Auto
Allowing for the 90-day total investment horizon BJs Wholesale Club is expected to generate 0.72 times more return on investment than Advance Auto. However, BJs Wholesale Club is 1.39 times less risky than Advance Auto. It trades about 0.0 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.4 per unit of risk. If you would invest 7,640 in BJs Wholesale Club on January 17, 2024 and sell it today you would lose (25.00) from holding BJs Wholesale Club or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Wholesale Club vs. Advance Auto Parts
Performance |
| Timeline |
| BJs Wholesale Club |
| Advance Auto Parts |
BJs Wholesale and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Wholesale and Advance Auto
The main advantage of trading using opposite BJs Wholesale and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Wholesale position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.| BJs Wholesale vs. Big Lots | BJs Wholesale vs. Dollar Tree | BJs Wholesale vs. Dicks Sporting Goods | BJs Wholesale vs. Williams Sonoma |
| Advance Auto vs. Cazoo Group | Advance Auto vs. U Power Limited | Advance Auto vs. SunCar Technology Group | Advance Auto vs. Jiuzi Holdings |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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