Correlation Between BJs Restaurants and Western

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

By analyzing existing cross correlation between BJs Restaurants and Western Digital 475, you can compare the effects of market volatilities on BJs Restaurants and Western 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 Western. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Western.

Diversification Opportunities for BJs Restaurants and Western

0.31

Correlation Coefficient

BJs Restaurants  Western

Weak diversification

The 3 months correlation between BJs and Western is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Western Digital 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 475 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 Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital 475 has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Western go up and down completely randomly.

Pair Corralation between BJs Restaurants and Western

Given the investment horizon of 90 days BJs Restaurants is expected to generate 2.38 times more return on investment than Western. However, BJs Restaurants is 2.38 times more volatile than Western Digital 475. It trades about 0.02 of its potential returns per unit of risk. Western Digital 475 is currently generating about 0.0 per unit of risk. If you would invest  3,133  in BJs Restaurants on October 23, 2024 and sell it today you would earn a total of  297.00  from holding BJs Restaurants or generate 9.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

BJs Restaurants  vs.  Western Digital 475

BJs Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BJs Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, BJs Restaurants is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Western Digital 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Western 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 Western

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

The idea behind BJs Restaurants and Western Digital 475 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 Global Correlations module to find global opportunities by holding instruments from different markets.