Correlation Between Air Products and BJs Restaurants
Can any of the company-specific risk be diversified away by investing in both Air Products 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 Air Products and BJs Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products and and BJs Restaurants, you can compare the effects of market volatilities on Air Products 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 Air Products with a short position of BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and BJs Restaurants.
Diversification Opportunities for Air Products and BJs Restaurants
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and BJs is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Air Products 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 Air Products and 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 Air Products i.e., Air Products and BJs Restaurants go up and down completely randomly.
Pair Corralation between Air Products and BJs Restaurants
Considering the 90-day investment horizon Air Products and is expected to under-perform the BJs Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, Air Products and is 3.04 times less risky than BJs Restaurants. The stock trades about -0.45 of its potential returns per unit of risk. The BJs Restaurants is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,493 in BJs Restaurants on September 19, 2024 and sell it today you would earn a total of 240.00 from holding BJs Restaurants or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products and vs. BJs Restaurants
Performance |
| Timeline |
| Air Products |
| BJs Restaurants |
Air Products and BJs Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and BJs Restaurants
The main advantage of trading using opposite Air Products and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products 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.| Air Products vs. PPG Industries | Air Products vs. Sherwin Williams Co | Air Products vs. Ecolab Inc | Air Products vs. Albemarle Corp |
| BJs Restaurants vs. Dine Brands Global | BJs Restaurants vs. Brinker International | BJs Restaurants vs. Bloomin Brands | BJs Restaurants vs. The Cheesecake Factory |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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