Correlation Between Ford and BJs Restaurants

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

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

Diversification Opportunities for Ford and BJs Restaurants

0.19

Correlation Coefficient

Ford  BJs Restaurants

Average diversification

The 3 months correlation between Ford and BJs is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Ford 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 Ford Motor 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 Ford i.e., Ford and BJs Restaurants go up and down completely randomly.

Pair Corralation between Ford and BJs Restaurants

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the BJs Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.06 times less risky than BJs Restaurants. The stock trades about -0.06 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  3,540  in BJs Restaurants on December 1, 2024 and sell it today you would earn a total of  20.00  from holding BJs Restaurants or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  BJs Restaurants

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental 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

Very 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and BJs Restaurants

The main advantage of trading using opposite Ford and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.