Correlation Between BJs Wholesale and Dollar General

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

Diversification Opportunities for BJs Wholesale and Dollar General

0.88

Correlation Coefficient

BJs Wholesale  Dollar General

Very poor diversification

The 3 months correlation between BJs and Dollar is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding BJs Wholesale Club and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General 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 Dollar General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar General has no effect on the direction of BJs Wholesale i.e., BJs Wholesale and Dollar General go up and down completely randomly.

Pair Corralation between BJs Wholesale and Dollar General

Allowing for the 90-day total investment horizon BJs Wholesale Club is expected to under-perform the Dollar General. But the stock apears to be less risky and, when comparing its historical volatility, BJs Wholesale Club is 1.01 times less risky than Dollar General. The stock trades about -0.19 of its potential returns per unit of risk. The Dollar General is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  15,548  in Dollar General on January 20, 2024 and sell it today you would lose (980.00) from holding Dollar General or give up 6.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

BJs Wholesale Club  vs.  Dollar General

BJs Wholesale Club

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking indicators, BJs Wholesale may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Dollar General

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar General are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Dollar General may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with BJs Wholesale and Dollar General

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

The idea behind BJs Wholesale Club and Dollar General 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 Commodity Directory module to find actively traded commodities issued by global exchanges.