Correlation Between BJs Restaurants and Direct Line
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and Direct Line 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 Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and Direct Line Insurance, you can compare the effects of market volatilities on BJs Restaurants and Direct Line 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 Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Direct Line.
Diversification Opportunities for BJs Restaurants and Direct Line
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between BJs and Direct is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Direct Line go up and down completely randomly.
Pair Corralation between BJs Restaurants and Direct Line
Given the investment horizon of 90 days BJs Restaurants is expected to generate 6.83 times less return on investment than Direct Line. But when comparing it to its historical volatility, BJs Restaurants is 1.24 times less risky than Direct Line. It trades about 0.02 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 783.00 in Direct Line Insurance on November 3, 2024 and sell it today you would earn a total of 614.00 from holding Direct Line Insurance or generate 78.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.58% |
| Values | Daily Returns |
BJs Restaurants vs. Direct Line Insurance
Performance |
| Timeline |
| BJs Restaurants |
| Direct Line Insurance |
BJs Restaurants and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and Direct Line
The main advantage of trading using opposite BJs Restaurants and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| BJs Restaurants vs. Dine Brands Global | BJs Restaurants vs. Brinker International | BJs Restaurants vs. Bloomin Brands | BJs Restaurants vs. The Cheesecake Factory |
| Direct Line vs. United Parks Resorts | Direct Line vs. Udemy Inc | Direct Line vs. BRP Inc | Direct Line vs. Ihuman Inc |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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