Correlation Between Sims Metal and BJs Restaurants
Can any of the company-specific risk be diversified away by investing in both Sims Metal 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 Sims Metal and BJs Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sims Metal Management and BJs Restaurants, you can compare the effects of market volatilities on Sims Metal 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 Sims Metal with a short position of BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and BJs Restaurants.
Diversification Opportunities for Sims Metal and BJs Restaurants
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sims and BJs is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Sims Metal 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 Sims Metal Management 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 Sims Metal i.e., Sims Metal and BJs Restaurants go up and down completely randomly.
Pair Corralation between Sims Metal and BJs Restaurants
Assuming the 90 days horizon Sims Metal is expected to generate 3.13 times less return on investment than BJs Restaurants. But when comparing it to its historical volatility, Sims Metal Management is 1.15 times less risky than BJs Restaurants. It trades about 0.1 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 3,080 in BJs Restaurants on September 3, 2024 and sell it today you would earn a total of 500.00 from holding BJs Restaurants or generate 16.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims Metal Management vs. BJs Restaurants
Performance |
| Timeline |
| Sims Metal Management |
| BJs Restaurants |
Sims Metal and BJs Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and BJs Restaurants
The main advantage of trading using opposite Sims Metal and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal 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.| Sims Metal vs. ArcelorMittal | Sims Metal vs. Steel Dynamics | Sims Metal vs. NIPPON STEEL SPADR | Sims Metal vs. POSCO Holdings |
| BJs Restaurants vs. Apollo Investment Corp | BJs Restaurants vs. REINET INVESTMENTS SCA | BJs Restaurants vs. ECHO INVESTMENT ZY | BJs Restaurants vs. MGIC INVESTMENT |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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