Correlation Between BJs Restaurants and Stepan

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

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

Diversification Opportunities for BJs Restaurants and Stepan

-0.05

Correlation Coefficient

BJs Restaurants  Stepan

Good diversification

The 3 months correlation between BJs and Stepan is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Stepan go up and down completely randomly.

Pair Corralation between BJs Restaurants and Stepan

Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.47 times more return on investment than Stepan. However, BJs Restaurants is 1.47 times more volatile than Stepan Company. It trades about 0.03 of its potential returns per unit of risk. Stepan Company is currently generating about -0.04 per unit of risk. If you would invest  2,731  in BJs Restaurants on September 26, 2024 and sell it today you would earn a total of  797.00  from holding BJs Restaurants or generate 29.18% 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.  Stepan Company

BJs Restaurants

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 5 (%) 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.

Stepan Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with BJs Restaurants and Stepan

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

The idea behind BJs Restaurants and Stepan Company 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.