Correlation Between TRACTOR SUPPLY and BJs Restaurants

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

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

Diversification Opportunities for TRACTOR SUPPLY and BJs Restaurants

0.0

Correlation Coefficient

TRACTOR SUPPLY  BJs Restaurants

Pay attention - limited upside

The 3 months correlation between TRACTOR and BJs is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TRACTOR SUPPLY and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and TRACTOR SUPPLY 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 TRACTOR SUPPLY 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 TRACTOR SUPPLY i.e., TRACTOR SUPPLY and BJs Restaurants go up and down completely randomly.

Pair Corralation between TRACTOR SUPPLY and BJs Restaurants

Assuming the 90 days trading horizon TRACTOR SUPPLY is expected to generate 1.02 times less return on investment than BJs Restaurants. But when comparing it to its historical volatility, TRACTOR SUPPLY is 1.47 times less risky than BJs Restaurants. It trades about 0.05 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,160  in BJs Restaurants on October 9, 2024 and sell it today you would earn a total of  300.00  from holding BJs Restaurants or generate 9.49% return on investment over 90 days.

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

TRACTOR SUPPLY  vs.  BJs Restaurants

TRACTOR SUPPLY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRACTOR SUPPLY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TRACTOR SUPPLY is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

BJs Restaurants

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BJs Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRACTOR SUPPLY and BJs Restaurants

The main advantage of trading using opposite TRACTOR SUPPLY and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRACTOR SUPPLY 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 TRACTOR SUPPLY 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.