Correlation Between BJs Restaurants and Hanover Insurance

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

By analyzing existing cross correlation between BJs Restaurants and The Hanover Insurance, you can compare the effects of market volatilities on BJs Restaurants and Hanover Insurance 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 Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Hanover Insurance.

Diversification Opportunities for BJs Restaurants and Hanover Insurance

0.41

Correlation Coefficient

BJs Restaurants  Hanover Insurance

Very weak diversification

The 3 months correlation between BJs and Hanover is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance 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 Hanover Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Insurance has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Hanover Insurance go up and down completely randomly.

Pair Corralation between BJs Restaurants and Hanover Insurance

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.42 times more return on investment than Hanover Insurance. However, BJs Restaurants is 1.42 times more volatile than The Hanover Insurance. It trades about 0.11 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.0 per unit of risk. If you would invest  2,940  in BJs Restaurants on April 23, 2025 and sell it today you would earn a total of  500.00  from holding BJs Restaurants or generate 17.01% 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.  The Hanover Insurance

BJs Restaurants

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BJs Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hanover Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Hanover Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hanover Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BJs Restaurants and Hanover Insurance

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

The idea behind BJs Restaurants and The Hanover Insurance 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.