Correlation Between BJs Restaurants and Bridgford Foods

Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and Bridgford Foods 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 Bridgford Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BJs Restaurants and Bridgford Foods, you can compare the effects of market volatilities on BJs Restaurants and Bridgford Foods 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 Bridgford Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Bridgford Foods.

Diversification Opportunities for BJs Restaurants and Bridgford Foods

0.29

Correlation Coefficient

BJs Restaurants  Bridgford Foods

Modest diversification

The 3 months correlation between BJs and Bridgford is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford Foods 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 Bridgford Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgford Foods has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Bridgford Foods go up and down completely randomly.

Pair Corralation between BJs Restaurants and Bridgford Foods

Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.32 times less return on investment than Bridgford Foods. But when comparing it to its historical volatility, BJs Restaurants is 1.31 times less risky than Bridgford Foods. It trades about 0.03 of its potential returns per unit of risk. Bridgford Foods is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  990.00  in Bridgford Foods on September 12, 2024 and sell it today you would earn a total of  46.00  from holding Bridgford Foods or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.8%
Values	Daily Returns

BJs Restaurants  vs.  Bridgford Foods

BJs Restaurants

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, BJs Restaurants demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bridgford Foods

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Bridgford Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and Bridgford Foods

The main advantage of trading using opposite BJs Restaurants and Bridgford Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, Bridgford Foods 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 Bridgford Foods will offset losses from the drop in Bridgford Foods' long position.

The idea behind BJs Restaurants and Bridgford Foods pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.