Correlation Between HYDROFARM HLD and BJs Restaurants
Can any of the company-specific risk be diversified away by investing in both HYDROFARM HLD 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 HYDROFARM HLD and BJs Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HYDROFARM HLD GRP and BJs Restaurants, you can compare the effects of market volatilities on HYDROFARM HLD 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 HYDROFARM HLD with a short position of BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of HYDROFARM HLD and BJs Restaurants.
Diversification Opportunities for HYDROFARM HLD and BJs Restaurants
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between HYDROFARM and BJs is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and HYDROFARM HLD 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 HYDROFARM HLD GRP 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 HYDROFARM HLD i.e., HYDROFARM HLD and BJs Restaurants go up and down completely randomly.
Pair Corralation between HYDROFARM HLD and BJs Restaurants
Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to generate 1.91 times more return on investment than BJs Restaurants. However, HYDROFARM HLD is 1.91 times more volatile than BJs Restaurants. It trades about 0.23 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.17 per unit of risk. If you would invest 40.00 in HYDROFARM HLD GRP on September 2, 2024 and sell it today you would earn a total of 37.00 from holding HYDROFARM HLD GRP or generate 92.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HYDROFARM HLD GRP vs. BJs Restaurants
Performance |
| Timeline |
| HYDROFARM HLD GRP |
| BJs Restaurants |
HYDROFARM HLD and BJs Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HYDROFARM HLD and BJs Restaurants
The main advantage of trading using opposite HYDROFARM HLD and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HYDROFARM HLD 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 HYDROFARM HLD GRP 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.| BJs Restaurants vs. ELECTRONIC ARTS | BJs Restaurants vs. REVO INSURANCE SPA | BJs Restaurants vs. Japan Post Insurance | BJs Restaurants vs. Safety Insurance Group |
Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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