Correlation Between BJs Restaurants and Kura Sushi

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

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

Diversification Opportunities for BJs Restaurants and Kura Sushi

0.86

Correlation Coefficient

BJs Restaurants  Kura Sushi

Very poor diversification

The 3 months correlation between BJs and Kura is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Kura Sushi USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kura Sushi USA 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 Kura Sushi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kura Sushi USA has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Kura Sushi go up and down completely randomly.

Pair Corralation between BJs Restaurants and Kura Sushi

Given the investment horizon of 90 days BJs Restaurants is expected to generate 3.08 times less return on investment than Kura Sushi. But when comparing it to its historical volatility, BJs Restaurants is 1.58 times less risky than Kura Sushi. It trades about 0.02 of its potential returns per unit of risk. Kura Sushi USA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,700  in Kura Sushi USA on September 17, 2024 and sell it today you would earn a total of  1,993  from holding Kura Sushi USA or generate 25.88% return on investment over 90 days.

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

BJs Restaurants  vs.  Kura Sushi USA

BJs Restaurants

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 6 (%) 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.

Kura Sushi USA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kura Sushi USA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kura Sushi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and Kura Sushi

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

The idea behind BJs Restaurants and Kura Sushi USA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.