Correlation Between BJs Restaurants and Nova Minerals

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

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

Diversification Opportunities for BJs Restaurants and Nova Minerals

0.34

Correlation Coefficient

BJs Restaurants  Nova Minerals

Weak diversification

The 3 months correlation between BJs and Nova is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Nova Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Minerals Limited 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 Nova Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Minerals Limited has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Nova Minerals go up and down completely randomly.

Pair Corralation between BJs Restaurants and Nova Minerals

Given the investment horizon of 90 days BJs Restaurants is expected to generate 15.54 times less return on investment than Nova Minerals. But when comparing it to its historical volatility, BJs Restaurants is 2.31 times less risky than Nova Minerals. It trades about 0.03 of its potential returns per unit of risk. Nova Minerals Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  480.00  in Nova Minerals Limited on October 9, 2024 and sell it today you would earn a total of  1,266  from holding Nova Minerals Limited or generate 263.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	46.96%
Values	Daily Returns

BJs Restaurants  vs.  Nova Minerals Limited

BJs Restaurants

Risk-Adjusted Performance

6 of 100

Modest

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 demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Nova Minerals Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Minerals Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nova Minerals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and Nova Minerals

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

The idea behind BJs Restaurants and Nova Minerals Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..