Correlation Between BJs Restaurants and Vale SA

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

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

Diversification Opportunities for BJs Restaurants and Vale SA

-0.22

Correlation Coefficient

BJs Restaurants  Vale SA

Very good diversification

The 3 months correlation between BJs and Vale is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Vale SA go up and down completely randomly.

Pair Corralation between BJs Restaurants and Vale SA

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.07 times more return on investment than Vale SA. However, BJs Restaurants is 1.07 times more volatile than Vale SA. It trades about 0.04 of its potential returns per unit of risk. Vale SA is currently generating about -0.19 per unit of risk. If you would invest  3,420  in BJs Restaurants on October 7, 2024 and sell it today you would earn a total of  100.00  from holding BJs Restaurants or generate 2.92% return on investment over 90 days.

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

BJs Restaurants  vs.  Vale SA

BJs Restaurants

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 6 (%) 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.

Vale SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BJs Restaurants and Vale SA

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

The idea behind BJs Restaurants and Vale SA 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.