Correlation Between BJs Restaurants and Nabors Energy

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

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

Diversification Opportunities for BJs Restaurants and Nabors Energy

-0.2

Correlation Coefficient

BJs Restaurants  Nabors Energy

Good diversification

The 3 months correlation between BJs and Nabors is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Nabors Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Energy Transition 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 Nabors Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Energy Transition has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Nabors Energy go up and down completely randomly.

Pair Corralation between BJs Restaurants and Nabors Energy

Given the investment horizon of 90 days BJs Restaurants is expected to generate 11.81 times more return on investment than Nabors Energy. However, BJs Restaurants is 11.81 times more volatile than Nabors Energy Transition. It trades about 0.04 of its potential returns per unit of risk. Nabors Energy Transition is currently generating about 0.1 per unit of risk. If you would invest  3,238  in BJs Restaurants on October 24, 2024 and sell it today you would earn a total of  192.00  from holding BJs Restaurants or generate 5.93% 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.  Nabors Energy Transition

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Nabors Energy Transition

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Energy Transition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Nabors Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BJs Restaurants and Nabors Energy

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

The idea behind BJs Restaurants and Nabors Energy Transition 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.