Correlation Between BJs Restaurants and Volaris

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

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

Diversification Opportunities for BJs Restaurants and Volaris

0.7

Correlation Coefficient

BJs Restaurants  Volaris

Poor diversification

The 3 months correlation between BJs and Volaris is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Volaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volaris 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 Volaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volaris has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Volaris go up and down completely randomly.

Pair Corralation between BJs Restaurants and Volaris

Given the investment horizon of 90 days BJs Restaurants is expected to under-perform the Volaris. In addition to that, BJs Restaurants is 1.32 times more volatile than Volaris. It trades about -0.14 of its total potential returns per unit of risk. Volaris is currently generating about -0.02 per unit of volatility. If you would invest  767.00  in Volaris on September 28, 2024 and sell it today you would lose (7.00) from holding Volaris or give up 0.91% of portfolio value over 90 days.

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

BJs Restaurants  vs.  Volaris

BJs Restaurants

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 4 (%) 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.

Volaris

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volaris are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Volaris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and Volaris

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

The idea behind BJs Restaurants and Volaris 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.