Correlation Between American Hotel and BJs Restaurants
Can any of the company-specific risk be diversified away by investing in both American Hotel and BJs Restaurants 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 American Hotel and BJs Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Hotel Income and BJs Restaurants, you can compare the effects of market volatilities on American Hotel and BJs Restaurants 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 American Hotel with a short position of BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Hotel and BJs Restaurants.
Diversification Opportunities for American Hotel and BJs Restaurants
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and BJs is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding American Hotel Income and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and American Hotel 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 American Hotel Income are associated (or correlated) with BJs Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Restaurants has no effect on the direction of American Hotel i.e., American Hotel and BJs Restaurants go up and down completely randomly.
Pair Corralation between American Hotel and BJs Restaurants
Assuming the 90 days horizon American Hotel Income is expected to generate 1.91 times more return on investment than BJs Restaurants. However, American Hotel is 1.91 times more volatile than BJs Restaurants. It trades about 0.08 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.05 per unit of risk. If you would invest 34.00 in American Hotel Income on October 26, 2024 and sell it today you would earn a total of 13.00 from holding American Hotel Income or generate 38.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Hotel Income vs. BJs Restaurants
Performance |
| Timeline |
| American Hotel Income |
| BJs Restaurants |
American Hotel and BJs Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Hotel and BJs Restaurants
The main advantage of trading using opposite American Hotel and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Hotel position performs unexpectedly, BJs Restaurants 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 BJs Restaurants will offset losses from the drop in BJs Restaurants' long position.| American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Braemar Hotels Resorts | American Hotel vs. Braemar Hotels Resorts |
| BJs Restaurants vs. Chipotle Mexican Grill | BJs Restaurants vs. Dominos Pizza Common | BJs Restaurants vs. Yum Brands | BJs Restaurants vs. The Wendys Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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