Correlation Between National Retail and BJs Wholesale

Can any of the company-specific risk be diversified away by investing in both National Retail 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 National Retail and BJs Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Retail Properties and BJs Wholesale Club, you can compare the effects of market volatilities on National Retail 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 National Retail with a short position of BJs Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Retail and BJs Wholesale.

Diversification Opportunities for National Retail and BJs Wholesale

-0.49

Correlation Coefficient

National Retail  BJs Wholesale

Very good diversification

The 3 months correlation between National and BJs is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties 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 National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and BJs Wholesale go up and down completely randomly.

Pair Corralation between National Retail and BJs Wholesale

Assuming the 90 days trading horizon National Retail Properties is expected to under-perform the BJs Wholesale. But the stock apears to be less risky and, when comparing its historical volatility, National Retail Properties is 1.13 times less risky than BJs Wholesale. The stock trades about -0.08 of its potential returns per unit of risk. The BJs Wholesale Club is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,350  in BJs Wholesale Club on September 25, 2024 and sell it today you would earn a total of  1,600  from holding BJs Wholesale Club or generate 21.77% return on investment over 90 days.

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

National Retail Properties  vs.  BJs Wholesale Club

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

BJs Wholesale Club

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BJs Wholesale reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Retail and BJs Wholesale

The main advantage of trading using opposite National Retail and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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.

The idea behind National Retail Properties and BJs Wholesale Club 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.