Correlation Between BJs Wholesale and Coca Cola

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

Diversification Opportunities for BJs Wholesale and Coca Cola

-0.6

Correlation Coefficient

BJs Wholesale  Coca Cola

Excellent diversification

The 3 months correlation between BJs and Coca is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Coca Cola Consolidated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Consolidated 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola Consolidated has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Coca Cola go up and down completely randomly.

Pair Corralation between BJs Wholesale and Coca Cola

Allowing for the 90-day total investment horizon BJs Wholesale is expected to generate 41.92 times less return on investment than Coca Cola. In addition to that, BJs Wholesale is 1.26 times more volatile than Coca Cola Consolidated. It trades about 0.0 of its total potential returns per unit of risk. Coca Cola Consolidated is currently generating about 0.04 per unit of volatility. If you would invest  84,463  in Coca Cola Consolidated on February 7, 2024 and sell it today you would earn a total of  877.00  from holding Coca Cola Consolidated or generate 1.04% 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.  Coca Cola Consolidated

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 abnormal forward-looking indicators, BJs Wholesale revealed solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola Consolidated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Coca Cola is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BJs Wholesale and Coca Cola

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

The idea behind BJs Wholesale Club and Coca Cola Consolidated 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.