Correlation Between Compass Group and BJs Restaurants
Can any of the company-specific risk be diversified away by investing in both Compass Group 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 Compass Group and BJs Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Group PLC and BJs Restaurants, you can compare the effects of market volatilities on Compass Group 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 Compass Group with a short position of BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and BJs Restaurants.
Diversification Opportunities for Compass Group and BJs Restaurants
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compass and BJs is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Compass Group 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 Compass Group PLC 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 Compass Group i.e., Compass Group and BJs Restaurants go up and down completely randomly.
Pair Corralation between Compass Group and BJs Restaurants
Assuming the 90 days horizon Compass Group PLC is expected to generate 0.35 times more return on investment than BJs Restaurants. However, Compass Group PLC is 2.86 times less risky than BJs Restaurants. It trades about 0.18 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.04 per unit of risk. If you would invest 2,777 in Compass Group PLC on August 30, 2024 and sell it today you would earn a total of 695.00 from holding Compass Group PLC or generate 25.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Group PLC vs. BJs Restaurants
Performance |
| Timeline |
| Compass Group PLC |
| BJs Restaurants |
Compass Group and BJs Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and BJs Restaurants
The main advantage of trading using opposite Compass Group and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group 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.| Compass Group vs. McDonalds | Compass Group vs. Starbucks | Compass Group vs. Chipotle Mexican Grill | Compass Group vs. Yum Brands |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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