Correlation Between SEALED AIR and BJs Restaurants

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

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

Diversification Opportunities for SEALED AIR and BJs Restaurants

0.61

Correlation Coefficient

SEALED AIR  BJs Restaurants

Poor diversification

The 3 months correlation between SEALED and BJs is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SEALED AIR and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and SEALED AIR 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 SEALED AIR 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 SEALED AIR i.e., SEALED AIR and BJs Restaurants go up and down completely randomly.

Pair Corralation between SEALED AIR and BJs Restaurants

Assuming the 90 days trading horizon SEALED AIR is expected to under-perform the BJs Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, SEALED AIR is 1.21 times less risky than BJs Restaurants. The stock trades about -0.14 of its potential returns per unit of risk. The BJs Restaurants is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  3,340  in BJs Restaurants on December 21, 2024 and sell it today you would lose (360.00) from holding BJs Restaurants or give up 10.78% of portfolio value over 90 days.

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

SEALED AIR   vs.  BJs Restaurants

SEALED AIR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SEALED AIR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

BJs Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days BJs Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with SEALED AIR and BJs Restaurants

The main advantage of trading using opposite SEALED AIR and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEALED AIR 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 SEALED AIR 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.