Correlation Between BJs Restaurants and Rivian Automotive

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

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

Diversification Opportunities for BJs Restaurants and Rivian Automotive

0.29

Correlation Coefficient

BJs Restaurants  Rivian Automotive

Modest diversification

The 3 months correlation between BJs and Rivian is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive 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 Rivian Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivian Automotive has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Rivian Automotive go up and down completely randomly.

Pair Corralation between BJs Restaurants and Rivian Automotive

Given the investment horizon of 90 days BJs Restaurants is expected to generate 0.58 times more return on investment than Rivian Automotive. However, BJs Restaurants is 1.73 times less risky than Rivian Automotive. It trades about 0.09 of its potential returns per unit of risk. Rivian Automotive is currently generating about 0.03 per unit of risk. If you would invest  2,982  in BJs Restaurants on October 3, 2024 and sell it today you would earn a total of  532.00  from holding BJs Restaurants or generate 17.84% return on investment over 90 days.

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

BJs Restaurants  vs.  Rivian Automotive

BJs Restaurants

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 3 (%) 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 February 2025.

Rivian Automotive

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with BJs Restaurants and Rivian Automotive

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

The idea behind BJs Restaurants and Rivian Automotive 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.