Correlation Between BJs Restaurants and Darden Restaurants
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and Darden 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 BJs Restaurants and Darden Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and Darden Restaurants, you can compare the effects of market volatilities on BJs Restaurants and Darden 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 BJs Restaurants with a short position of Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Darden Restaurants.
Diversification Opportunities for BJs Restaurants and Darden Restaurants
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between BJs and Darden is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants 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 Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Darden Restaurants go up and down completely randomly.
Pair Corralation between BJs Restaurants and Darden Restaurants
Given the investment horizon of 90 days BJs Restaurants is expected to generate 2.43 times less return on investment than Darden Restaurants. In addition to that, BJs Restaurants is 1.35 times more volatile than Darden Restaurants. It trades about 0.07 of its total potential returns per unit of risk. Darden Restaurants is currently generating about 0.22 per unit of volatility. If you would invest 18,175 in Darden Restaurants on November 18, 2024 and sell it today you would earn a total of 944.00 from holding Darden Restaurants or generate 5.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. Darden Restaurants
Performance |
| Timeline |
| BJs Restaurants |
| Darden Restaurants |
BJs Restaurants and Darden Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and Darden Restaurants
The main advantage of trading using opposite BJs Restaurants and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, Darden 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 Darden Restaurants will offset losses from the drop in Darden Restaurants' long position.| BJs Restaurants vs. Dine Brands Global | BJs Restaurants vs. Brinker International | BJs Restaurants vs. Bloomin Brands | BJs Restaurants vs. The Cheesecake Factory |
| Darden Restaurants vs. Dine Brands Global | Darden Restaurants vs. Bloomin Brands | Darden Restaurants vs. BJs Restaurants | Darden Restaurants vs. The Cheesecake Factory |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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