Correlation Between BJs Restaurants and New Horizon

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

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

Diversification Opportunities for BJs Restaurants and New Horizon

-0.14

Correlation Coefficient

BJs Restaurants  New Horizon

Good diversification

The 3 months correlation between BJs and New is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and New Horizon Aircraft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Aircraft 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 New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Aircraft has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and New Horizon go up and down completely randomly.

Pair Corralation between BJs Restaurants and New Horizon

Given the investment horizon of 90 days BJs Restaurants is expected to generate 0.21 times more return on investment than New Horizon. However, BJs Restaurants is 4.82 times less risky than New Horizon. It trades about 0.03 of its potential returns per unit of risk. New Horizon Aircraft is currently generating about -0.15 per unit of risk. If you would invest  3,562  in BJs Restaurants on October 26, 2024 and sell it today you would earn a total of  25.00  from holding BJs Restaurants or generate 0.7% return on investment over 90 days.

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

BJs Restaurants  vs.  New Horizon Aircraft

BJs Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

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

New Horizon Aircraft

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, New Horizon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and New Horizon

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

The idea behind BJs Restaurants and New Horizon Aircraft 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.