Correlation Between BJs Wholesale and BRF SA

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

Diversification Opportunities for BJs Wholesale and BRF SA

0.84

Correlation Coefficient

BJs Wholesale  BRF SA

Very poor diversification

The 3 months correlation between BJs and BRF is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and BRF SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA ADR 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 BRF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRF SA ADR has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and BRF SA go up and down completely randomly.

Pair Corralation between BJs Wholesale and BRF SA

Allowing for the 90-day total investment horizon BJs Wholesale is expected to generate 2.42 times less return on investment than BRF SA. But when comparing it to its historical volatility, BJs Wholesale Club is 1.13 times less risky than BRF SA. It trades about 0.02 of its potential returns per unit of risk. BRF SA ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  321.00  in BRF SA ADR on February 4, 2024 and sell it today you would earn a total of  12.00  from holding BRF SA ADR or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.73%
Values	Daily Returns

BJs Wholesale Club  vs.  BRF SA ADR

BJs Wholesale Club

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking indicators, BJs Wholesale revealed solid returns over the last few months and may actually be approaching a breakup point.

BRF SA ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, BRF SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Wholesale and BRF SA

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

The idea behind BJs Wholesale Club and BRF SA ADR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.