Correlation Between BJs Restaurants and Huaneng Power

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

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

Diversification Opportunities for BJs Restaurants and Huaneng Power

0.01

Correlation Coefficient

BJs Restaurants  Huaneng Power

Significant diversification

The 3 months correlation between BJs and Huaneng is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Huaneng Power International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Power Intern 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 Huaneng Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Power Intern has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Huaneng Power go up and down completely randomly.

Pair Corralation between BJs Restaurants and Huaneng Power

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 3.04 times less return on investment than Huaneng Power. But when comparing it to its historical volatility, BJs Restaurants is 1.49 times less risky than Huaneng Power. It trades about 0.02 of its potential returns per unit of risk. Huaneng Power International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Huaneng Power International on October 27, 2024 and sell it today you would earn a total of  18.00  from holding Huaneng Power International or generate 62.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

BJs Restaurants  vs.  Huaneng Power International

BJs Restaurants

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, BJs Restaurants is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Huaneng Power Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaneng Power International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Huaneng Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BJs Restaurants and Huaneng Power

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

The idea behind BJs Restaurants and Huaneng Power International 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..