Correlation Between BJs Restaurants and Sphere Entertainment

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

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

Diversification Opportunities for BJs Restaurants and Sphere Entertainment

0.51

Correlation Coefficient

BJs Restaurants  Sphere Entertainment

Very weak diversification

The 3 months correlation between BJs and Sphere is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment and BJs Restaurants 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 BJs Restaurants are associated (or correlated) with Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Sphere Entertainment go up and down completely randomly.

Pair Corralation between BJs Restaurants and Sphere Entertainment

Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.13 times less return on investment than Sphere Entertainment. But when comparing it to its historical volatility, BJs Restaurants is 1.15 times less risky than Sphere Entertainment. It trades about 0.04 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,967  in Sphere Entertainment Co on February 6, 2024 and sell it today you would earn a total of  1,159  from holding Sphere Entertainment Co or generate 39.06% return on investment over 90 days.

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

BJs Restaurants  vs.  Sphere Entertainment Co

BJs Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BJs Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, BJs Restaurants is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Sphere Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sphere Entertainment Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Sphere Entertainment may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with BJs Restaurants and Sphere Entertainment

The main advantage of trading using opposite BJs Restaurants and Sphere Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, Sphere Entertainment 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 Sphere Entertainment will offset losses from the drop in Sphere Entertainment's long position.

The idea behind BJs Restaurants and Sphere Entertainment Co 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 Anywhere module to track or share privately all of your investments from the convenience of any device.