Correlation Between Huadi International and BJs Restaurants

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

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

Diversification Opportunities for Huadi International and BJs Restaurants

0.28

Correlation Coefficient

Huadi International  BJs Restaurants

Modest diversification

The 3 months correlation between Huadi and BJs is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Huadi International Group and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Huadi International 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 Huadi International Group 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 Huadi International i.e., Huadi International and BJs Restaurants go up and down completely randomly.

Pair Corralation between Huadi International and BJs Restaurants

Given the investment horizon of 90 days Huadi International Group is expected to under-perform the BJs Restaurants. In addition to that, Huadi International is 1.99 times more volatile than BJs Restaurants. It trades about 0.0 of its total potential returns per unit of risk. BJs Restaurants is currently generating about 0.09 per unit of volatility. If you would invest  2,952  in BJs Restaurants on December 5, 2024 and sell it today you would earn a total of  740.00  from holding BJs Restaurants or generate 25.07% return on investment over 90 days.

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

Huadi International Group  vs.  BJs Restaurants

Huadi International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huadi International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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. 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 Huadi International and BJs Restaurants

The main advantage of trading using opposite Huadi International and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huadi International 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 Huadi International Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.