Correlation Between BJs Wholesale and Applied Materials
Can any of the company-specific risk be diversified away by investing in both BJs Wholesale and Applied Materials 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 Applied Materials 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 Applied Materials, you can compare the effects of market volatilities on BJs Wholesale and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Wholesale and Applied Materials.
Diversification Opportunities for BJs Wholesale and Applied Materials
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between BJs and Applied is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Applied Materials go up and down completely randomly.
Pair Corralation between BJs Wholesale and Applied Materials
Assuming the 90 days horizon BJs Wholesale is expected to generate 1.6 times less return on investment than Applied Materials. But when comparing it to its historical volatility, BJs Wholesale Club is 1.48 times less risky than Applied Materials. It trades about 0.05 of its potential returns per unit of risk. Applied Materials is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 10,596 in Applied Materials on September 3, 2024 and sell it today you would earn a total of 6,282 from holding Applied Materials or generate 59.29% 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. Applied Materials
Performance |
| Timeline |
| BJs Wholesale Club |
| Applied Materials |
BJs Wholesale and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Wholesale and Applied Materials
The main advantage of trading using opposite BJs Wholesale and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Wholesale position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| BJs Wholesale vs. Walmart | BJs Wholesale vs. Superior Plus Corp | BJs Wholesale vs. NMI Holdings | BJs Wholesale vs. Origin Agritech |
| Applied Materials vs. ASML HOLDING NY | Applied Materials vs. ASML Holding NV | Applied Materials vs. ASML Holding NV | Applied Materials vs. Lam Research |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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