Correlation Between BJs Restaurants and Delek Drilling

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

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

Diversification Opportunities for BJs Restaurants and Delek Drilling

0.6

Correlation Coefficient

BJs Restaurants  Delek Drilling

Poor diversification

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

Pair Corralation between BJs Restaurants and Delek Drilling

Given the investment horizon of 90 days BJs Restaurants is expected to generate 6.23 times less return on investment than Delek Drilling. In addition to that, BJs Restaurants is 1.18 times more volatile than Delek Drilling . It trades about 0.02 of its total potential returns per unit of risk. Delek Drilling is currently generating about 0.14 per unit of volatility. If you would invest  219.00  in Delek Drilling on September 25, 2024 and sell it today you would earn a total of  108.00  from holding Delek Drilling or generate 49.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

BJs Restaurants  vs.  Delek Drilling

BJs Restaurants

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, BJs Restaurants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Delek Drilling

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and Delek Drilling

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

The idea behind BJs Restaurants and Delek Drilling 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 Channel module to use Commodity Channel Index to analyze current equity momentum.