Correlation Between Canadian Utilities and BJs Wholesale
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and BJs Wholesale 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 Canadian Utilities and BJs Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and BJs Wholesale Club, you can compare the effects of market volatilities on Canadian Utilities and BJs Wholesale 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 Canadian Utilities with a short position of BJs Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and BJs Wholesale.
Diversification Opportunities for Canadian Utilities and BJs Wholesale
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and BJs is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and BJs Wholesale Club in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Wholesale Club and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with BJs Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Wholesale Club has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and BJs Wholesale go up and down completely randomly.
Pair Corralation between Canadian Utilities and BJs Wholesale
Assuming the 90 days horizon Canadian Utilities is expected to generate 2.16 times less return on investment than BJs Wholesale. But when comparing it to its historical volatility, Canadian Utilities Limited is 1.89 times less risky than BJs Wholesale. It trades about 0.22 of its potential returns per unit of risk. BJs Wholesale Club is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 7,950 in BJs Wholesale Club on September 4, 2024 and sell it today you would earn a total of 1,100 from holding BJs Wholesale Club or generate 13.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. BJs Wholesale Club
Performance |
| Timeline |
| Canadian Utilities |
| BJs Wholesale Club |
Canadian Utilities and BJs Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and BJs Wholesale
The main advantage of trading using opposite Canadian Utilities and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, BJs Wholesale 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 BJs Wholesale will offset losses from the drop in BJs Wholesale's long position.| Canadian Utilities vs. SBA Communications Corp | Canadian Utilities vs. UET United Electronic | Canadian Utilities vs. Charter Communications | Canadian Utilities vs. METHODE ELECTRONICS |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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