Correlation Between BJs Wholesale and Diageo Plc
Can any of the company-specific risk be diversified away by investing in both BJs Wholesale and Diageo Plc 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 Diageo Plc 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 Diageo plc, you can compare the effects of market volatilities on BJs Wholesale and Diageo Plc 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 Diageo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Wholesale and Diageo Plc.
Diversification Opportunities for BJs Wholesale and Diageo Plc
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BJs and Diageo is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc 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 Diageo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo plc has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Diageo Plc go up and down completely randomly.
Pair Corralation between BJs Wholesale and Diageo Plc
Assuming the 90 days horizon BJs Wholesale Club is expected to generate 1.3 times more return on investment than Diageo Plc. However, BJs Wholesale is 1.3 times more volatile than Diageo plc. It trades about 0.08 of its potential returns per unit of risk. Diageo plc is currently generating about -0.05 per unit of risk. If you would invest 5,750 in BJs Wholesale Club on September 1, 2024 and sell it today you would earn a total of 3,300 from holding BJs Wholesale Club or generate 57.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
BJs Wholesale Club vs. Diageo plc
Performance |
| Timeline |
| BJs Wholesale Club |
| Diageo plc |
BJs Wholesale and Diageo Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Wholesale and Diageo Plc
The main advantage of trading using opposite BJs Wholesale and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Wholesale position performs unexpectedly, Diageo Plc 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 Diageo Plc will offset losses from the drop in Diageo Plc's long position.| BJs Wholesale vs. Superior Plus Corp | BJs Wholesale vs. NMI Holdings | BJs Wholesale vs. Origin Agritech | BJs Wholesale vs. SIVERS SEMICONDUCTORS AB |
| Diageo Plc vs. JJ SNACK FOODS | Diageo Plc vs. AUSNUTRIA DAIRY | Diageo Plc vs. Austevoll Seafood ASA | Diageo Plc vs. CN MODERN DAIRY |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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