Correlation Between BJs Wholesale and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both BJs Wholesale and Methode Electronics 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 Methode Electronics 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 Methode Electronics, you can compare the effects of market volatilities on BJs Wholesale and Methode Electronics 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 Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Wholesale and Methode Electronics.
Diversification Opportunities for BJs Wholesale and Methode Electronics
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BJs and Methode is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics 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 Methode Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methode Electronics has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Methode Electronics go up and down completely randomly.
Pair Corralation between BJs Wholesale and Methode Electronics
Assuming the 90 days horizon BJs Wholesale Club is expected to generate 0.42 times more return on investment than Methode Electronics. However, BJs Wholesale Club is 2.4 times less risky than Methode Electronics. It trades about 0.38 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.11 per unit of risk. If you would invest 8,750 in BJs Wholesale Club on November 8, 2024 and sell it today you would earn a total of 1,250 from holding BJs Wholesale Club or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Wholesale Club vs. Methode Electronics
Performance |
| Timeline |
| BJs Wholesale Club |
| Methode Electronics |
BJs Wholesale and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Wholesale and Methode Electronics
The main advantage of trading using opposite BJs Wholesale and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Wholesale position performs unexpectedly, Methode Electronics 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 Methode Electronics will offset losses from the drop in Methode Electronics' long position.| BJs Wholesale vs. Direct Line Insurance | BJs Wholesale vs. MAVEN WIRELESS SWEDEN | BJs Wholesale vs. WillScot Mobile Mini | BJs Wholesale vs. T MOBILE INCDL 00001 |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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