Correlation Between BJs Restaurants and Papa Johns

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

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

Diversification Opportunities for BJs Restaurants and Papa Johns

-0.11

Correlation Coefficient

BJs Restaurants  Papa Johns

Good diversification

The 3 months correlation between BJs and Papa is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Papa Johns International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papa Johns International 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 Papa Johns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papa Johns International has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Papa Johns go up and down completely randomly.

Pair Corralation between BJs Restaurants and Papa Johns

Given the investment horizon of 90 days BJs Restaurants is expected to generate 0.98 times more return on investment than Papa Johns. However, BJs Restaurants is 1.02 times less risky than Papa Johns. It trades about -0.12 of its potential returns per unit of risk. Papa Johns International is currently generating about -0.46 per unit of risk. If you would invest  3,721  in BJs Restaurants on September 24, 2024 and sell it today you would lose (236.00) from holding BJs Restaurants or give up 6.34% of portfolio value over 90 days.

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

BJs Restaurants  vs.  Papa Johns International

BJs Restaurants

Risk-Adjusted Performance

4 of 100

Insignificant

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 January 2025.

Papa Johns International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Papa Johns International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BJs Restaurants and Papa Johns

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

The idea behind BJs Restaurants and Papa Johns International 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.