Correlation Between China Clean and BJs Restaurants

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

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

Diversification Opportunities for China Clean and BJs Restaurants

0.0

Correlation Coefficient

China Clean  BJs Restaurants

Pay attention - limited upside

The 3 months correlation between China and BJs is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Clean Energy and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and China Clean 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 China Clean Energy 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 China Clean i.e., China Clean and BJs Restaurants go up and down completely randomly.

Pair Corralation between China Clean and BJs Restaurants

If you would invest  3,493  in BJs Restaurants on September 19, 2024 and sell it today you would earn a total of  200.50  from holding BJs Restaurants or generate 5.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Clean Energy  vs.  BJs Restaurants

China Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, China Clean is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

BJs Restaurants

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 6 (%) 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 China Clean and BJs Restaurants

The main advantage of trading using opposite China Clean and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Clean 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 China Clean Energy 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.