Correlation Between BJs Restaurants and Hanover Foods

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

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

Diversification Opportunities for BJs Restaurants and Hanover Foods

-0.01

Correlation Coefficient

BJs Restaurants  Hanover Foods

Good diversification

The 3 months correlation between BJs and Hanover is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Foods 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 Hanover Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Foods has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Hanover Foods go up and down completely randomly.

Pair Corralation between BJs Restaurants and Hanover Foods

Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.69 times more return on investment than Hanover Foods. However, BJs Restaurants is 1.69 times more volatile than Hanover Foods. It trades about 0.02 of its potential returns per unit of risk. Hanover Foods is currently generating about 0.03 per unit of risk. If you would invest  3,068  in BJs Restaurants on October 10, 2024 and sell it today you would earn a total of  456.00  from holding BJs Restaurants or generate 14.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.2%
Values	Daily Returns

BJs Restaurants  vs.  Hanover Foods

BJs Restaurants

Risk-Adjusted Performance

4 of 100

Modest

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 February 2025.

Hanover Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanover Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BJs Restaurants and Hanover Foods

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

The idea behind BJs Restaurants and Hanover Foods 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.