Correlation Between Treasury Wine and BJs Restaurants

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

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

Diversification Opportunities for Treasury Wine and BJs Restaurants

-0.13

Correlation Coefficient

Treasury Wine  BJs Restaurants

Good diversification

The 3 months correlation between Treasury and BJs is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and BJs Restaurants go up and down completely randomly.

Pair Corralation between Treasury Wine and BJs Restaurants

Assuming the 90 days horizon Treasury Wine Estates is expected to generate 0.61 times more return on investment than BJs Restaurants. However, Treasury Wine Estates is 1.64 times less risky than BJs Restaurants. It trades about -0.1 of its potential returns per unit of risk. BJs Restaurants is currently generating about -0.12 per unit of risk. If you would invest  698.00  in Treasury Wine Estates on September 25, 2024 and sell it today you would lose (19.00) from holding Treasury Wine Estates or give up 2.72% of portfolio value over 90 days.

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

Treasury Wine Estates  vs.  BJs Restaurants

Treasury Wine Estates

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Wine Estates are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Treasury Wine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BJs Restaurants

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BJs Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Wine and BJs Restaurants

The main advantage of trading using opposite Treasury Wine and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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 Treasury Wine Estates 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.