Correlation Between Franklin Credit and BJs Restaurants

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

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

Diversification Opportunities for Franklin Credit and BJs Restaurants

0.57

Correlation Coefficient

Franklin Credit  BJs Restaurants

Very weak diversification

The 3 months correlation between Franklin and BJs is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Credit Management and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Franklin Credit 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 Franklin Credit Management 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 Franklin Credit i.e., Franklin Credit and BJs Restaurants go up and down completely randomly.

Pair Corralation between Franklin Credit and BJs Restaurants

Given the investment horizon of 90 days Franklin Credit is expected to generate 1.72 times less return on investment than BJs Restaurants. In addition to that, Franklin Credit is 1.6 times more volatile than BJs Restaurants. It trades about 0.06 of its total potential returns per unit of risk. BJs Restaurants is currently generating about 0.16 per unit of volatility. If you would invest  2,982  in BJs Restaurants on August 31, 2024 and sell it today you would earn a total of  802.00  from holding BJs Restaurants or generate 26.89% return on investment over 90 days.

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

Franklin Credit Management  vs.  BJs Restaurants

Franklin Credit Mana

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Credit Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Franklin Credit displayed solid returns over the last few months and may actually be approaching a breakup point.

BJs Restaurants

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 12 (%) 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 Franklin Credit and BJs Restaurants

The main advantage of trading using opposite Franklin Credit and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Credit 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 Franklin Credit Management 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.