Correlation Between BJs Restaurants and Flexible Solutions

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

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

Diversification Opportunities for BJs Restaurants and Flexible Solutions

0.59

Correlation Coefficient

BJs Restaurants  Flexible Solutions

Very weak diversification

The 3 months correlation between BJs and Flexible is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Flexible Solutions go up and down completely randomly.

Pair Corralation between BJs Restaurants and Flexible Solutions

Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.07 times less return on investment than Flexible Solutions. But when comparing it to its historical volatility, BJs Restaurants is 1.27 times less risky than Flexible Solutions. It trades about 0.03 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  298.00  in Flexible Solutions International on September 26, 2024 and sell it today you would earn a total of  58.00  from holding Flexible Solutions International or generate 19.46% return on investment over 90 days.

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

BJs Restaurants  vs.  Flexible Solutions Internation

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.

Flexible Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flexible Solutions International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Flexible Solutions is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BJs Restaurants and Flexible Solutions

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

The idea behind BJs Restaurants and Flexible Solutions International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.