Correlation Between BJs Wholesale and Willamette Valley

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

Diversification Opportunities for BJs Wholesale and Willamette Valley

-0.7

Correlation Coefficient

BJs Wholesale  Willamette Valley

Excellent diversification

The 3 months correlation between BJs and Willamette is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Willamette Valley go up and down completely randomly.

Pair Corralation between BJs Wholesale and Willamette Valley

Allowing for the 90-day total investment horizon BJs Wholesale Club is expected to generate 0.88 times more return on investment than Willamette Valley. However, BJs Wholesale Club is 1.14 times less risky than Willamette Valley. It trades about 0.21 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.09 per unit of risk. If you would invest  7,908  in BJs Wholesale Club on September 1, 2024 and sell it today you would earn a total of  1,722  from holding BJs Wholesale Club or generate 21.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BJs Wholesale Club  vs.  Willamette Valley Vineyards

BJs Wholesale Club

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 16 (%) 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.

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with BJs Wholesale and Willamette Valley

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

The idea behind BJs Wholesale Club and Willamette Valley Vineyards 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.