Correlation Between BJs Restaurants and Amazon

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

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

Diversification Opportunities for BJs Restaurants and Amazon

0.4

Correlation Coefficient

BJs Restaurants  Amazon

Very weak diversification

The 3 months correlation between BJs and Amazon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and BJs Restaurants 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 BJs Restaurants are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Amazon go up and down completely randomly.

Pair Corralation between BJs Restaurants and Amazon

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.09 times more return on investment than Amazon. However, BJs Restaurants is 1.09 times more volatile than Amazon Inc. It trades about -0.08 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.16 per unit of risk. 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	Weak
Accuracy	100.0%
Values	Daily Returns

BJs Restaurants  vs.  Amazon Inc

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 uncertain 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.

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Pair Trading with BJs Restaurants and Amazon

The main advantage of trading using opposite BJs Restaurants and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.

The idea behind BJs Restaurants and Amazon Inc 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.