Correlation Between United Airlines and BJs Restaurants

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

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

Diversification Opportunities for United Airlines and BJs Restaurants

0.81

Correlation Coefficient

United Airlines  BJs Restaurants

Very poor diversification

The 3 months correlation between United and BJs is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and United Airlines 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 United Airlines Holdings 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 United Airlines i.e., United Airlines and BJs Restaurants go up and down completely randomly.

Pair Corralation between United Airlines and BJs Restaurants

Considering the 90-day investment horizon United Airlines Holdings is expected to generate 1.05 times more return on investment than BJs Restaurants. However, United Airlines is 1.05 times more volatile than BJs Restaurants. It trades about 0.13 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.02 per unit of risk. If you would invest  4,208  in United Airlines Holdings on September 20, 2024 and sell it today you would earn a total of  5,291  from holding United Airlines Holdings or generate 125.74% return on investment over 90 days.

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

United Airlines Holdings  vs.  BJs Restaurants

United Airlines Holdings

Risk-Adjusted Performance

27 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, United Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

BJs Restaurants

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, BJs Restaurants demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Airlines and BJs Restaurants

The main advantage of trading using opposite United Airlines and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines 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 United Airlines Holdings 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 Transaction History module to view history of all your transactions and understand their impact on performance.