Correlation Between GLG LIFE and BJs Restaurants
Can any of the company-specific risk be diversified away by investing in both GLG LIFE 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 GLG LIFE and BJs Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GLG LIFE TECH and BJs Restaurants, you can compare the effects of market volatilities on GLG LIFE 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 GLG LIFE with a short position of BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of GLG LIFE and BJs Restaurants.
Diversification Opportunities for GLG LIFE and BJs Restaurants
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GLG and BJs is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GLG LIFE TECH and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and GLG LIFE 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 GLG LIFE TECH 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 GLG LIFE i.e., GLG LIFE and BJs Restaurants go up and down completely randomly.
Pair Corralation between GLG LIFE and BJs Restaurants
Assuming the 90 days trading horizon GLG LIFE TECH is expected to generate 22.26 times more return on investment than BJs Restaurants. However, GLG LIFE is 22.26 times more volatile than BJs Restaurants. It trades about 0.06 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.06 per unit of risk. If you would invest 1.40 in GLG LIFE TECH on August 25, 2024 and sell it today you would earn a total of 0.60 from holding GLG LIFE TECH or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GLG LIFE TECH vs. BJs Restaurants
Performance |
| Timeline |
| GLG LIFE TECH |
| BJs Restaurants |
GLG LIFE and BJs Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GLG LIFE and BJs Restaurants
The main advantage of trading using opposite GLG LIFE and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GLG LIFE 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 GLG LIFE TECH 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. Apple Inc | BJs Restaurants vs. Apple Inc | BJs Restaurants vs. Apple Inc | BJs Restaurants vs. Apple Inc |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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