Correlation Between Krispy Kreme and BJs Wholesale

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

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

Diversification Opportunities for Krispy Kreme and BJs Wholesale

-0.54

Correlation Coefficient

Krispy Kreme  BJs Wholesale

Excellent diversification

The 3 months correlation between Krispy and BJs is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme 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 Krispy Kreme 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 Krispy Kreme 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 Krispy Kreme i.e., Krispy Kreme and BJs Wholesale go up and down completely randomly.

Pair Corralation between Krispy Kreme and BJs Wholesale

Given the investment horizon of 90 days Krispy Kreme is expected to under-perform the BJs Wholesale. In addition to that, Krispy Kreme is 1.03 times more volatile than BJs Wholesale Club. It trades about -0.52 of its total potential returns per unit of risk. BJs Wholesale Club is currently generating about -0.18 per unit of volatility. If you would invest  9,840  in BJs Wholesale Club on September 26, 2024 and sell it today you would lose (461.00) from holding BJs Wholesale Club or give up 4.68% of portfolio value over 90 days.

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

Krispy Kreme  vs.  BJs Wholesale Club

Krispy Kreme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Krispy Kreme has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent 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

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 10 (%) 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.

Pair Trading with Krispy Kreme and BJs Wholesale

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

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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 Transaction History module to view history of all your transactions and understand their impact on performance.