Correlation Between BJs Restaurants and PT Indofood

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

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

Diversification Opportunities for BJs Restaurants and PT Indofood

0.53

Correlation Coefficient

BJs Restaurants  PT Indofood

Very weak diversification

The 3 months correlation between BJs and ISM is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses 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 PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and PT Indofood go up and down completely randomly.

Pair Corralation between BJs Restaurants and PT Indofood

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 0.5 times more return on investment than PT Indofood. However, BJs Restaurants is 1.99 times less risky than PT Indofood. It trades about 0.0 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about -0.03 per unit of risk. If you would invest  3,320  in BJs Restaurants on December 28, 2024 and sell it today you would lose (40.00) from holding BJs Restaurants or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

BJs Restaurants  vs.  PT Indofood Sukses

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

PT Indofood Sukses

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indofood Sukses has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BJs Restaurants and PT Indofood

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

The idea behind BJs Restaurants and PT Indofood Sukses 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 Stocks Directory module to find actively traded stocks across global markets.