Correlation Between BJs Restaurants and REVO INSURANCE

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

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

Diversification Opportunities for BJs Restaurants and REVO INSURANCE

0.76

Correlation Coefficient

BJs Restaurants  REVO INSURANCE

Poor diversification

The 3 months correlation between BJs and REVO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and REVO INSURANCE SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REVO INSURANCE SPA 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 REVO INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REVO INSURANCE SPA has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and REVO INSURANCE go up and down completely randomly.

Pair Corralation between BJs Restaurants and REVO INSURANCE

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 2.0 times less return on investment than REVO INSURANCE. But when comparing it to its historical volatility, BJs Restaurants is 1.69 times less risky than REVO INSURANCE. It trades about 0.08 of its potential returns per unit of risk. REVO INSURANCE SPA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,105  in REVO INSURANCE SPA on October 9, 2024 and sell it today you would earn a total of  60.00  from holding REVO INSURANCE SPA or generate 5.43% return on investment over 90 days.

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

BJs Restaurants  vs.  REVO INSURANCE SPA

BJs Restaurants

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BJs Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

REVO INSURANCE SPA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REVO INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and REVO INSURANCE

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

The idea behind BJs Restaurants and REVO INSURANCE SPA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.