Correlation Between BJs Restaurants and Eastern

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

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

Diversification Opportunities for BJs Restaurants and Eastern

-0.43

Correlation Coefficient

BJs Restaurants  Eastern

Very good diversification

The 3 months correlation between BJs and Eastern is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern 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 Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Eastern go up and down completely randomly.

Pair Corralation between BJs Restaurants and Eastern

Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.34 times less return on investment than Eastern. But when comparing it to its historical volatility, BJs Restaurants is 1.13 times less risky than Eastern. It trades about 0.03 of its potential returns per unit of risk. Eastern Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,904  in Eastern Co on September 21, 2024 and sell it today you would earn a total of  895.00  from holding Eastern Co or generate 47.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

BJs Restaurants  vs.  Eastern Co

BJs Restaurants

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 5 (%) 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.

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with BJs Restaurants and Eastern

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

The idea behind BJs Restaurants and Eastern Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.