Correlation Between BJs Restaurants and Valeura Energy

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

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

Diversification Opportunities for BJs Restaurants and Valeura Energy

0.31

Correlation Coefficient

BJs Restaurants  Valeura Energy

Weak diversification

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

Pair Corralation between BJs Restaurants and Valeura Energy

Given the investment horizon of 90 days BJs Restaurants is expected to under-perform the Valeura Energy. But the stock apears to be less risky and, when comparing its historical volatility, BJs Restaurants is 1.32 times less risky than Valeura Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Valeura Energy is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  450.00  in Valeura Energy on October 5, 2024 and sell it today you would earn a total of  48.00  from holding Valeura Energy or generate 10.67% 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.  Valeura Energy

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.

Valeura Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and Valeura Energy

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

The idea behind BJs Restaurants and Valeura Energy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.