Correlation Between Bloomin Brands and Papa Johns

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

By analyzing existing cross correlation between Bloomin Brands and Papa Johns International, you can compare the effects of market volatilities on Bloomin Brands and Papa Johns 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 Bloomin Brands with a short position of Papa Johns. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloomin Brands and Papa Johns.

Diversification Opportunities for Bloomin Brands and Papa Johns

0.71

Correlation Coefficient

Bloomin Brands  Papa Johns

Poor diversification

The 3 months correlation between Bloomin and Papa is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bloomin Brands and Papa Johns International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papa Johns International and Bloomin Brands 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 Bloomin Brands are associated (or correlated) with Papa Johns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papa Johns International has no effect on the direction of Bloomin Brands i.e., Bloomin Brands and Papa Johns go up and down completely randomly.

Pair Corralation between Bloomin Brands and Papa Johns

Given the investment horizon of 90 days Bloomin Brands is expected to generate 1.1 times more return on investment than Papa Johns. However, Bloomin Brands is 1.1 times more volatile than Papa Johns International. It trades about -0.36 of its potential returns per unit of risk. Papa Johns International is currently generating about -0.46 per unit of risk. If you would invest  1,416  in Bloomin Brands on September 24, 2024 and sell it today you would lose (270.00) from holding Bloomin Brands or give up 19.07% of portfolio value over 90 days.

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

Bloomin Brands  vs.  Papa Johns International

Bloomin Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Papa Johns International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Papa Johns International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bloomin Brands and Papa Johns

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

The idea behind Bloomin Brands and Papa Johns International 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.