Correlation Between BJs Restaurants and AMERICAN

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

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

Diversification Opportunities for BJs Restaurants and AMERICAN

-0.19

Correlation Coefficient

BJs Restaurants  AMERICAN

Good diversification

The 3 months correlation between BJs and AMERICAN is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and AMERICAN INTL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN INTL GROUP 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN INTL GROUP has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and AMERICAN go up and down completely randomly.

Pair Corralation between BJs Restaurants and AMERICAN

Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.78 times more return on investment than AMERICAN. However, BJs Restaurants is 1.78 times more volatile than AMERICAN INTL GROUP. It trades about 0.09 of its potential returns per unit of risk. AMERICAN INTL GROUP is currently generating about -0.38 per unit of risk. If you would invest  3,548  in BJs Restaurants on October 8, 2024 and sell it today you would earn a total of  119.00  from holding BJs Restaurants or generate 3.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.11%
Values	Daily Returns

BJs Restaurants  vs.  AMERICAN INTL GROUP

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.

AMERICAN INTL GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMERICAN INTL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BJs Restaurants and AMERICAN

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

The idea behind BJs Restaurants and AMERICAN INTL GROUP 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.