Correlation Between ETFS Coffee and BJs Restaurants
Can any of the company-specific risk be diversified away by investing in both ETFS Coffee 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 ETFS Coffee and BJs Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETFS Coffee ETC and BJs Restaurants, you can compare the effects of market volatilities on ETFS Coffee 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 ETFS Coffee with a short position of BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and BJs Restaurants.
Diversification Opportunities for ETFS Coffee and BJs Restaurants
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETFS and BJs is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and ETFS Coffee 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 ETFS Coffee ETC 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 ETFS Coffee i.e., ETFS Coffee and BJs Restaurants go up and down completely randomly.
Pair Corralation between ETFS Coffee and BJs Restaurants
Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 0.77 times more return on investment than BJs Restaurants. However, ETFS Coffee ETC is 1.3 times less risky than BJs Restaurants. It trades about 0.49 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.05 per unit of risk. If you would invest 3,861 in ETFS Coffee ETC on August 28, 2024 and sell it today you would earn a total of 1,068 from holding ETFS Coffee ETC or generate 27.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
ETFS Coffee ETC vs. BJs Restaurants
Performance |
| Timeline |
| ETFS Coffee ETC |
| BJs Restaurants |
ETFS Coffee and BJs Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Coffee and BJs Restaurants
The main advantage of trading using opposite ETFS Coffee and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee 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.| ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc |
| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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