Correlation Between BJs Restaurants and Sekisui Chemical

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

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

Diversification Opportunities for BJs Restaurants and Sekisui Chemical

0.38

Correlation Coefficient

BJs Restaurants  Sekisui Chemical

Weak diversification

The 3 months correlation between BJs and Sekisui is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical 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 Sekisui Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui Chemical has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Sekisui Chemical go up and down completely randomly.

Pair Corralation between BJs Restaurants and Sekisui Chemical

Assuming the 90 days trading horizon BJs Restaurants is expected to under-perform the Sekisui Chemical. In addition to that, BJs Restaurants is 1.01 times more volatile than Sekisui Chemical Co. It trades about 0.0 of its total potential returns per unit of risk. Sekisui Chemical Co is currently generating about 0.11 per unit of volatility. If you would invest  1,280  in Sekisui Chemical Co on October 27, 2024 and sell it today you would earn a total of  210.00  from holding Sekisui Chemical Co or generate 16.41% 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.  Sekisui Chemical Co

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.

Sekisui Chemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui Chemical Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sekisui Chemical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and Sekisui Chemical

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

The idea behind BJs Restaurants and Sekisui Chemical Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.