Correlation Between BJs Restaurants and CANADA RARE

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

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

Diversification Opportunities for BJs Restaurants and CANADA RARE

0.24

Correlation Coefficient

BJs Restaurants  CANADA RARE

Modest diversification

The 3 months correlation between BJs and CANADA is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and CANADA RARE EARTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANADA RARE EARTH 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 CANADA RARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANADA RARE EARTH has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and CANADA RARE go up and down completely randomly.

Pair Corralation between BJs Restaurants and CANADA RARE

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 0.06 times more return on investment than CANADA RARE. However, BJs Restaurants is 15.9 times less risky than CANADA RARE. It trades about -0.05 of its potential returns per unit of risk. CANADA RARE EARTH is currently generating about -0.02 per unit of risk. If you would invest  3,360  in BJs Restaurants on October 20, 2024 and sell it today you would lose (60.00) from holding BJs Restaurants or give up 1.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

BJs Restaurants  vs.  CANADA RARE EARTH

BJs Restaurants

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BJs Restaurants is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

CANADA RARE EARTH

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CANADA RARE EARTH are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CANADA RARE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and CANADA RARE

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

The idea behind BJs Restaurants and CANADA RARE EARTH 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.