Correlation Between BJs Restaurants and SEIKO EPSON

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

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

Diversification Opportunities for BJs Restaurants and SEIKO EPSON

0.22

Correlation Coefficient

BJs Restaurants  SEIKO EPSON

Modest diversification

The 3 months correlation between BJs and SEIKO is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and SEIKO EPSON PADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEIKO EPSON PADR 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 SEIKO EPSON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEIKO EPSON PADR has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and SEIKO EPSON go up and down completely randomly.

Pair Corralation between BJs Restaurants and SEIKO EPSON

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.3 times more return on investment than SEIKO EPSON. However, BJs Restaurants is 1.3 times more volatile than SEIKO EPSON PADR. It trades about 0.17 of its potential returns per unit of risk. SEIKO EPSON PADR is currently generating about 0.0 per unit of risk. If you would invest  2,760  in BJs Restaurants on September 2, 2024 and sell it today you would earn a total of  820.00  from holding BJs Restaurants or generate 29.71% return on investment over 90 days.

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

BJs Restaurants  vs.  SEIKO EPSON PADR

BJs Restaurants

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, BJs Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

SEIKO EPSON PADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind BJs Restaurants and SEIKO EPSON PADR 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.