Correlation Between BJs Restaurants and GigaMedia
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and GigaMedia 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 GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and GigaMedia, you can compare the effects of market volatilities on BJs Restaurants and GigaMedia 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 GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and GigaMedia.
Diversification Opportunities for BJs Restaurants and GigaMedia
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BJs and GigaMedia is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia 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 GigaMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaMedia has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and GigaMedia go up and down completely randomly.
Pair Corralation between BJs Restaurants and GigaMedia
Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.92 times more return on investment than GigaMedia. However, BJs Restaurants is 1.92 times more volatile than GigaMedia. It trades about 0.03 of its potential returns per unit of risk. GigaMedia is currently generating about 0.02 per unit of risk. If you would invest 2,760 in BJs Restaurants on September 12, 2024 and sell it today you would earn a total of 580.00 from holding BJs Restaurants or generate 21.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. GigaMedia
Performance |
| Timeline |
| BJs Restaurants |
| GigaMedia |
BJs Restaurants and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and GigaMedia
The main advantage of trading using opposite BJs Restaurants and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, GigaMedia 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 GigaMedia will offset losses from the drop in GigaMedia's long position.| 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 Stocks Directory module to find actively traded stocks across global markets.
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