Correlation Between BJs Restaurants and American Hotel
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and American Hotel 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 American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and American Hotel Income, you can compare the effects of market volatilities on BJs Restaurants and American Hotel 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 American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and American Hotel.
Diversification Opportunities for BJs Restaurants and American Hotel
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BJs and American is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income 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 American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and American Hotel go up and down completely randomly.
Pair Corralation between BJs Restaurants and American Hotel
Given the investment horizon of 90 days BJs Restaurants is expected to generate 2.86 times less return on investment than American Hotel. But when comparing it to its historical volatility, BJs Restaurants is 1.91 times less risky than American Hotel. It trades about 0.05 of its potential returns per unit of risk. American Hotel Income is currently generating about 0.08 of returns per unit of risk over similar time horizon. 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 |
BJs Restaurants vs. American Hotel Income
Performance |
| Timeline |
| BJs Restaurants |
| American Hotel Income |
BJs Restaurants and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and American Hotel
The main advantage of trading using opposite BJs Restaurants and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.| BJs Restaurants vs. Chipotle Mexican Grill | BJs Restaurants vs. Dominos Pizza Common | BJs Restaurants vs. Yum Brands | BJs Restaurants vs. The Wendys Co |
| American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Braemar Hotels Resorts | American Hotel vs. Braemar Hotels Resorts |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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