Correlation Between BJs Restaurants and Warner Music
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and Warner Music 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 Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and Warner Music Group, you can compare the effects of market volatilities on BJs Restaurants and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Warner Music.
Diversification Opportunities for BJs Restaurants and Warner Music
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BJs and Warner is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Warner Music go up and down completely randomly.
Pair Corralation between BJs Restaurants and Warner Music
Assuming the 90 days trading horizon BJs Restaurants is expected to under-perform the Warner Music. In addition to that, BJs Restaurants is 1.04 times more volatile than Warner Music Group. It trades about -0.02 of its total potential returns per unit of risk. Warner Music Group is currently generating about 0.13 per unit of volatility. If you would invest 2,840 in Warner Music Group on December 12, 2024 and sell it today you would earn a total of 309.00 from holding Warner Music Group or generate 10.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. Warner Music Group
Performance |
| Timeline |
| BJs Restaurants |
| Warner Music Group |
BJs Restaurants and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and Warner Music
The main advantage of trading using opposite BJs Restaurants and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| BJs Restaurants vs. Scandinavian Tobacco Group | ||
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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