Correlation Between Coca Cola and BJs Restaurants

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

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

Diversification Opportunities for Coca Cola and BJs Restaurants

-0.57

Correlation Coefficient

Coca Cola  BJs Restaurants

Excellent diversification

The 3 months correlation between Coca and BJs is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Coca Cola 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 The Coca Cola 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 Coca Cola i.e., Coca Cola and BJs Restaurants go up and down completely randomly.

Pair Corralation between Coca Cola and BJs Restaurants

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 3.47 times less return on investment than BJs Restaurants. But when comparing it to its historical volatility, The Coca Cola is 3.22 times less risky than BJs Restaurants. It trades about 0.02 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,160  in BJs Restaurants on October 5, 2024 and sell it today you would earn a total of  354.00  from holding BJs Restaurants or generate 11.2% return on investment over 90 days.

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

The Coca Cola  vs.  BJs Restaurants

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

BJs Restaurants

Risk-Adjusted Performance

4 of 100

Weak

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 February 2025.

Pair Trading with Coca Cola and BJs Restaurants

The main advantage of trading using opposite Coca Cola and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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 The Coca Cola 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.