Correlation Between BJs Restaurants and FAT Brands
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and FAT Brands 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 FAT Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and FAT Brands, you can compare the effects of market volatilities on BJs Restaurants and FAT Brands 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 FAT Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and FAT Brands.
Diversification Opportunities for BJs Restaurants and FAT Brands
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between BJs and FAT is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands 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 FAT Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAT Brands has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and FAT Brands go up and down completely randomly.
Pair Corralation between BJs Restaurants and FAT Brands
Given the investment horizon of 90 days BJs Restaurants is expected to generate 0.61 times more return on investment than FAT Brands. However, BJs Restaurants is 1.64 times less risky than FAT Brands. It trades about 0.01 of its potential returns per unit of risk. FAT Brands is currently generating about 0.01 per unit of risk. If you would invest 3,488 in BJs Restaurants on August 24, 2024 and sell it today you would lose (36.00) from holding BJs Restaurants or give up 1.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. FAT Brands
Performance |
| Timeline |
| BJs Restaurants |
| FAT Brands |
BJs Restaurants and FAT Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and FAT Brands
The main advantage of trading using opposite BJs Restaurants and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, FAT Brands 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 FAT Brands will offset losses from the drop in FAT Brands' long position.| BJs Restaurants vs. Dine Brands Global | BJs Restaurants vs. Brinker International | BJs Restaurants vs. Bloomin Brands | BJs Restaurants vs. The Cheesecake Factory |
| FAT Brands vs. FAT Brands | FAT Brands vs. Brinker International | FAT Brands vs. Jack In The | FAT Brands vs. Potbelly 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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