Correlation Between Bloomin Brands and BJs Restaurants

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

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

Diversification Opportunities for Bloomin Brands and BJs Restaurants

-0.43

Correlation Coefficient

Bloomin Brands  BJs Restaurants

Very good diversification

The 3 months correlation between Bloomin and BJs is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bloomin Brands and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Bloomin Brands 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 Bloomin Brands are associated (or correlated) with BJs Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Restaurants has no effect on the direction of Bloomin Brands i.e., Bloomin Brands and BJs Restaurants go up and down completely randomly.

Pair Corralation between Bloomin Brands and BJs Restaurants

Given the investment horizon of 90 days Bloomin Brands is expected to under-perform the BJs Restaurants. In addition to that, Bloomin Brands is 1.27 times more volatile than BJs Restaurants. It trades about -0.08 of its total potential returns per unit of risk. BJs Restaurants is currently generating about 0.17 per unit of volatility. If you would invest  2,982  in BJs Restaurants on September 2, 2024 and sell it today you would earn a total of  862.00  from holding BJs Restaurants or generate 28.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bloomin Brands  vs.  BJs Restaurants

Bloomin Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BJs Restaurants

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, BJs Restaurants demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bloomin Brands and BJs Restaurants

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

The idea behind Bloomin Brands and BJs Restaurants 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.