Correlation Between PFIZER and BJs Restaurants

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

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

Diversification Opportunities for PFIZER and BJs Restaurants

-0.54

Correlation Coefficient

PFIZER  BJs Restaurants

Excellent diversification

The 3 months correlation between PFIZER and BJs is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding PFIZER INC and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and PFIZER 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 PFIZER INC 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 PFIZER i.e., PFIZER and BJs Restaurants go up and down completely randomly.

Pair Corralation between PFIZER and BJs Restaurants

Assuming the 90 days trading horizon PFIZER is expected to generate 2.48 times less return on investment than BJs Restaurants. But when comparing it to its historical volatility, PFIZER INC is 8.91 times less risky than BJs Restaurants. It trades about 0.03 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,547  in BJs Restaurants on September 29, 2024 and sell it today you would lose (73.00) from holding BJs Restaurants or give up 2.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

PFIZER INC  vs.  BJs Restaurants

PFIZER INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PFIZER INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PFIZER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

BJs Restaurants

Risk-Adjusted Performance

4 of 100

Insignificant

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 January 2025.

Pair Trading with PFIZER and BJs Restaurants

The main advantage of trading using opposite PFIZER and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PFIZER 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 PFIZER INC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.