Correlation Between BJs Restaurants and HANOVER INSURANCE
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and HANOVER INSURANCE 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 HANOVER INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and HANOVER INSURANCE, you can compare the effects of market volatilities on BJs Restaurants and HANOVER INSURANCE 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 HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and HANOVER INSURANCE.
Diversification Opportunities for BJs Restaurants and HANOVER INSURANCE
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BJs and HANOVER is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE 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 HANOVER INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANOVER INSURANCE has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and HANOVER INSURANCE go up and down completely randomly.
Pair Corralation between BJs Restaurants and HANOVER INSURANCE
Assuming the 90 days trading horizon BJs Restaurants is expected to under-perform the HANOVER INSURANCE. In addition to that, BJs Restaurants is 1.96 times more volatile than HANOVER INSURANCE. It trades about -0.1 of its total potential returns per unit of risk. HANOVER INSURANCE is currently generating about -0.13 per unit of volatility. If you would invest 15,206 in HANOVER INSURANCE on October 1, 2024 and sell it today you would lose (406.00) from holding HANOVER INSURANCE or give up 2.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. HANOVER INSURANCE
Performance |
| Timeline |
| BJs Restaurants |
| HANOVER INSURANCE |
BJs Restaurants and HANOVER INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and HANOVER INSURANCE
The main advantage of trading using opposite BJs Restaurants and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, HANOVER INSURANCE 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 HANOVER INSURANCE will offset losses from the drop in HANOVER INSURANCE's long position.| BJs Restaurants vs. GUARDANT HEALTH CL | BJs Restaurants vs. SHIP HEALTHCARE HLDGINC | BJs Restaurants vs. Tower One Wireless | BJs Restaurants vs. HEALTHCARE REAL A |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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