Correlation Between BJs Restaurants and First Watch
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and First Watch 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 First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and First Watch Restaurant, you can compare the effects of market volatilities on BJs Restaurants and First Watch 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 First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and First Watch.
Diversification Opportunities for BJs Restaurants and First Watch
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BJs and First is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant 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 First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and First Watch go up and down completely randomly.
Pair Corralation between BJs Restaurants and First Watch
Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.09 times more return on investment than First Watch. However, BJs Restaurants is 1.09 times more volatile than First Watch Restaurant. It trades about 0.03 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.03 per unit of risk. If you would invest 2,892 in BJs Restaurants on August 28, 2024 and sell it today you would earn a total of 829.00 from holding BJs Restaurants or generate 28.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. First Watch Restaurant
Performance |
| Timeline |
| BJs Restaurants |
| First Watch Restaurant |
BJs Restaurants and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and First Watch
The main advantage of trading using opposite BJs Restaurants and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, First Watch 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 First Watch will offset losses from the drop in First Watch'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 |
| First Watch vs. Dine Brands Global | First Watch vs. Bloomin Brands | First Watch vs. BJs Restaurants | First Watch 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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