Correlation Between BJs Restaurants and Commerce Bancshares

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

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

Diversification Opportunities for BJs Restaurants and Commerce Bancshares

0.81

Correlation Coefficient

BJs Restaurants  Commerce Bancshares

Very poor diversification

The 3 months correlation between BJs and Commerce is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Commerce Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Bancshares 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 Commerce Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerce Bancshares has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Commerce Bancshares go up and down completely randomly.

Pair Corralation between BJs Restaurants and Commerce Bancshares

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 2.89 times less return on investment than Commerce Bancshares. In addition to that, BJs Restaurants is 1.49 times more volatile than Commerce Bancshares. It trades about 0.02 of its total potential returns per unit of risk. Commerce Bancshares is currently generating about 0.1 per unit of volatility. If you would invest  4,767  in Commerce Bancshares on September 22, 2024 and sell it today you would earn a total of  1,333  from holding Commerce Bancshares or generate 27.96% return on investment over 90 days.

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

BJs Restaurants  vs.  Commerce Bancshares

BJs Restaurants

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BJs Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Commerce Bancshares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commerce Bancshares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Commerce Bancshares reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and Commerce Bancshares

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

The idea behind BJs Restaurants and Commerce Bancshares 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.