Correlation Between Evolution Mining and BJs Restaurants

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

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

Diversification Opportunities for Evolution Mining and BJs Restaurants

0.01

Correlation Coefficient

Evolution Mining  BJs Restaurants

Significant diversification

The 3 months correlation between Evolution and BJs is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Evolution Mining 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 Evolution Mining are associated (or correlated) with BJs Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Restaurants has no effect on the direction of Evolution Mining i.e., Evolution Mining and BJs Restaurants go up and down completely randomly.

Pair Corralation between Evolution Mining and BJs Restaurants

Assuming the 90 days horizon Evolution Mining is expected to generate 1.93 times more return on investment than BJs Restaurants. However, Evolution Mining is 1.93 times more volatile than BJs Restaurants. It trades about 0.2 of its potential returns per unit of risk. BJs Restaurants is currently generating about -0.04 per unit of risk. If you would invest  285.00  in Evolution Mining on December 20, 2024 and sell it today you would earn a total of  150.00  from holding Evolution Mining or generate 52.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Evolution Mining  vs.  BJs Restaurants

Evolution Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Evolution Mining reported solid returns over the last few months and may actually be approaching a breakup point.

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 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.

Pair Trading with Evolution Mining and BJs Restaurants

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

The idea behind Evolution Mining and BJs Restaurants 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.