Correlation Between Citigroup and BJs Restaurants

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

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

Diversification Opportunities for Citigroup and BJs Restaurants

0.8

Correlation Coefficient

Citigroup  BJs Restaurants

Very poor diversification

The 3 months correlation between Citigroup and BJs is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and BJs Restaurants go up and down completely randomly.

Pair Corralation between Citigroup and BJs Restaurants

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.87 times less return on investment than BJs Restaurants. But when comparing it to its historical volatility, Citigroup is 1.28 times less risky than BJs Restaurants. It trades about 0.13 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,680  in BJs Restaurants on September 3, 2024 and sell it today you would earn a total of  900.00  from holding BJs Restaurants or generate 33.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Citigroup  vs.  BJs Restaurants

Citigroup

Risk-Adjusted Performance

10 of 100

OK

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

BJs Restaurants

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BJs Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and BJs Restaurants

The main advantage of trading using opposite Citigroup and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.