Correlation Between Eagle Materials and BJs Restaurants

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

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

Diversification Opportunities for Eagle Materials and BJs Restaurants

0.03

Correlation Coefficient

Eagle Materials  BJs Restaurants

Significant diversification

The 3 months correlation between Eagle and BJs is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Eagle Materials 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 Eagle Materials 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 Eagle Materials i.e., Eagle Materials and BJs Restaurants go up and down completely randomly.

Pair Corralation between Eagle Materials and BJs Restaurants

Assuming the 90 days horizon Eagle Materials is expected to under-perform the BJs Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 1.37 times less risky than BJs Restaurants. The stock trades about -0.05 of its potential returns per unit of risk. The BJs Restaurants is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,340  in BJs Restaurants on October 25, 2024 and sell it today you would earn a total of  20.00  from holding BJs Restaurants or generate 0.6% return on investment over 90 days.

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

Eagle Materials  vs.  BJs Restaurants

Eagle Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BJs Restaurants

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BJs Restaurants is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eagle Materials and BJs Restaurants

The main advantage of trading using opposite Eagle Materials and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials 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 Eagle Materials 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.