Correlation Between BJs Restaurants and Veralto

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

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

Diversification Opportunities for BJs Restaurants and Veralto

0.2

Correlation Coefficient

BJs Restaurants  Veralto

Modest diversification

The 3 months correlation between BJs and Veralto is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Veralto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veralto 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 Veralto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veralto has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Veralto go up and down completely randomly.

Pair Corralation between BJs Restaurants and Veralto

Given the investment horizon of 90 days BJs Restaurants is expected to under-perform the Veralto. In addition to that, BJs Restaurants is 1.58 times more volatile than Veralto. It trades about -0.06 of its total potential returns per unit of risk. Veralto is currently generating about -0.03 per unit of volatility. If you would invest  10,122  in Veralto on December 19, 2024 and sell it today you would lose (286.00) from holding Veralto or give up 2.83% of portfolio value over 90 days.

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

BJs Restaurants  vs.  Veralto

BJs Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days BJs Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Veralto

Risk-Adjusted Performance

Very Weak

Over the last 90 days Veralto has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Veralto is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BJs Restaurants and Veralto

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

The idea behind BJs Restaurants and Veralto 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.