Correlation Between BJs Restaurants and Western Digital
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and Western Digital 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 Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and Western Digital, you can compare the effects of market volatilities on BJs Restaurants and Western Digital 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 Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Western Digital.
Diversification Opportunities for BJs Restaurants and Western Digital
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BJs and Western is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Western Digital go up and down completely randomly.
Pair Corralation between BJs Restaurants and Western Digital
Given the investment horizon of 90 days BJs Restaurants is expected to generate 2.23 times less return on investment than Western Digital. In addition to that, BJs Restaurants is 1.13 times more volatile than Western Digital. It trades about 0.03 of its total potential returns per unit of risk. Western Digital is currently generating about 0.08 per unit of volatility. If you would invest 4,010 in Western Digital on August 31, 2024 and sell it today you would earn a total of 3,289 from holding Western Digital or generate 82.02% 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. Western Digital
Performance |
| Timeline |
| BJs Restaurants |
| Western Digital |
BJs Restaurants and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and Western Digital
The main advantage of trading using opposite BJs Restaurants and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital's long position.| BJs Restaurants vs. Dine Brands Global | BJs Restaurants vs. Brinker International | BJs Restaurants vs. Bloomin Brands | BJs Restaurants vs. The Cheesecake Factory |
| Western Digital vs. RLJ Lodging Trust | Western Digital vs. Aquagold International | Western Digital vs. Stepstone Group | Western Digital vs. Morningstar Unconstrained Allocation |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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