Correlation Between BJs Restaurants and Papa Johns
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and Papa Johns 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 Papa Johns into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and Papa Johns International, you can compare the effects of market volatilities on BJs Restaurants and Papa Johns 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 Papa Johns. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Papa Johns.
Diversification Opportunities for BJs Restaurants and Papa Johns
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BJs and Papa is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Papa Johns International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papa Johns International 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 Papa Johns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papa Johns International has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Papa Johns go up and down completely randomly.
Pair Corralation between BJs Restaurants and Papa Johns
Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.11 times more return on investment than Papa Johns. However, BJs Restaurants is 1.11 times more volatile than Papa Johns International. It trades about -0.01 of its potential returns per unit of risk. Papa Johns International is currently generating about -0.1 per unit of risk. If you would invest 3,511 in BJs Restaurants on August 24, 2024 and sell it today you would lose (59.00) from holding BJs Restaurants or give up 1.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. Papa Johns International
Performance |
| Timeline |
| BJs Restaurants |
| Papa Johns International |
BJs Restaurants and Papa Johns Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and Papa Johns
The main advantage of trading using opposite BJs Restaurants and Papa Johns positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, Papa Johns 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 Papa Johns will offset losses from the drop in Papa Johns' long position.| BJs Restaurants vs. Dine Brands Global | BJs Restaurants vs. Brinker International | BJs Restaurants vs. Bloomin Brands | BJs Restaurants vs. The Cheesecake Factory |
| Papa Johns vs. Yum Brands | Papa Johns vs. Wingstop | Papa Johns vs. Darden Restaurants | Papa Johns vs. Chipotle Mexican Grill |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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