Correlation Between Cracker Barrel and BJs Restaurants

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

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

Diversification Opportunities for Cracker Barrel and BJs Restaurants

0.63

Correlation Coefficient

Cracker Barrel  BJs Restaurants

Poor diversification

The 3 months correlation between Cracker and BJs is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cracker Barrel Old and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Cracker Barrel 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 Cracker Barrel Old 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 Cracker Barrel i.e., Cracker Barrel and BJs Restaurants go up and down completely randomly.

Pair Corralation between Cracker Barrel and BJs Restaurants

Given the investment horizon of 90 days Cracker Barrel Old is expected to under-perform the BJs Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, Cracker Barrel Old is 1.19 times less risky than BJs Restaurants. The stock trades about -0.03 of its potential returns per unit of risk. The BJs Restaurants is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,513  in BJs Restaurants on February 6, 2024 and sell it today you would earn a total of  996.00  from holding BJs Restaurants or generate 39.63% return on investment over 90 days.

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

Cracker Barrel Old  vs.  BJs Restaurants

Cracker Barrel Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cracker Barrel Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Cracker Barrel and BJs Restaurants

The main advantage of trading using opposite Cracker Barrel and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cracker Barrel 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 Cracker Barrel Old 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.