Correlation Between BJs Restaurants and Consolidated Communications
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and Consolidated Communications 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 Consolidated Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and Consolidated Communications Holdings, you can compare the effects of market volatilities on BJs Restaurants and Consolidated Communications 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 Consolidated Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Consolidated Communications.
Diversification Opportunities for BJs Restaurants and Consolidated Communications
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BJs and Consolidated is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Consolidated Communications Ho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Communications 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 Consolidated Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Communications has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Consolidated Communications go up and down completely randomly.
Pair Corralation between BJs Restaurants and Consolidated Communications
Assuming the 90 days trading horizon BJs Restaurants is expected to generate 2.95 times more return on investment than Consolidated Communications. However, BJs Restaurants is 2.95 times more volatile than Consolidated Communications Holdings. It trades about 0.03 of its potential returns per unit of risk. Consolidated Communications Holdings is currently generating about 0.05 per unit of risk. If you would invest 2,980 in BJs Restaurants on September 14, 2024 and sell it today you would earn a total of 440.00 from holding BJs Restaurants or generate 14.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. Consolidated Communications Ho
Performance |
| Timeline |
| BJs Restaurants |
| Consolidated Communications |
BJs Restaurants and Consolidated Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and Consolidated Communications
The main advantage of trading using opposite BJs Restaurants and Consolidated Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, Consolidated Communications 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 Consolidated Communications will offset losses from the drop in Consolidated Communications' long position.| BJs Restaurants vs. GREENX METALS LTD | BJs Restaurants vs. North American Construction | BJs Restaurants vs. Dairy Farm International | BJs Restaurants vs. DISTRICT METALS |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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