Correlation Between Skechers USA and BJs Restaurants

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

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

Diversification Opportunities for Skechers USA and BJs Restaurants

-0.69

Correlation Coefficient

Skechers USA  BJs Restaurants

Excellent diversification

The 3 months correlation between Skechers and BJs is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Skechers USA 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 Skechers USA 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 Skechers USA i.e., Skechers USA and BJs Restaurants go up and down completely randomly.

Pair Corralation between Skechers USA and BJs Restaurants

Considering the 90-day investment horizon Skechers USA is expected to generate 0.74 times more return on investment than BJs Restaurants. However, Skechers USA is 1.36 times less risky than BJs Restaurants. It trades about 0.05 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.03 per unit of risk. If you would invest  4,225  in Skechers USA on August 30, 2024 and sell it today you would earn a total of  2,146  from holding Skechers USA or generate 50.79% return on investment over 90 days.

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

Skechers USA  vs.  BJs Restaurants

Skechers USA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skechers USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Skechers USA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

BJs Restaurants

Risk-Adjusted Performance

11 of 100

OK

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 conflicting basic indicators, BJs Restaurants demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skechers USA and BJs Restaurants

The main advantage of trading using opposite Skechers USA and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skechers USA 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 Skechers USA 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.