Correlation Between BJs Restaurants and Oracle

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

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

Diversification Opportunities for BJs Restaurants and Oracle

0.6

Correlation Coefficient

BJs Restaurants  Oracle

Poor diversification

The 3 months correlation between BJs and Oracle is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle 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 Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Oracle go up and down completely randomly.

Pair Corralation between BJs Restaurants and Oracle

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.96 times less return on investment than Oracle. In addition to that, BJs Restaurants is 1.41 times more volatile than Oracle. It trades about 0.03 of its total potential returns per unit of risk. Oracle is currently generating about 0.08 per unit of volatility. If you would invest  7,905  in Oracle on October 9, 2024 and sell it today you would earn a total of  8,095  from holding Oracle or generate 102.4% return on investment over 90 days.

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

BJs Restaurants  vs.  Oracle

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.

Oracle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oracle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Oracle 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 Oracle

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

The idea behind BJs Restaurants and Oracle 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.