Correlation Between Delek Drilling and BJs Restaurants

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

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

Diversification Opportunities for Delek Drilling and BJs Restaurants

0.6

Correlation Coefficient

Delek Drilling  BJs Restaurants

Poor diversification

The 3 months correlation between Delek and BJs is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Delek Drilling 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 Delek Drilling 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 Delek Drilling i.e., Delek Drilling and BJs Restaurants go up and down completely randomly.

Pair Corralation between Delek Drilling and BJs Restaurants

Assuming the 90 days horizon Delek Drilling is expected to generate 0.85 times more return on investment than BJs Restaurants. However, Delek Drilling is 1.18 times less risky than BJs Restaurants. It trades about 0.14 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.02 per unit of risk. If you would invest  219.00  in Delek Drilling on September 25, 2024 and sell it today you would earn a total of  108.00  from holding Delek Drilling or generate 49.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Delek Drilling   vs.  BJs Restaurants

Delek Drilling

Risk-Adjusted Performance

13 of 100

Good

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

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.

Pair Trading with Delek Drilling and BJs Restaurants

The main advantage of trading using opposite Delek Drilling and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Drilling 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 Delek Drilling 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.