Correlation Between BJs Restaurants and Radcom

Can any of the company-specific risk be diversified away by investing in both BJs Restaurants and Radcom 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 Radcom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BJs Restaurants and Radcom, you can compare the effects of market volatilities on BJs Restaurants and Radcom 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 Radcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Radcom.

Diversification Opportunities for BJs Restaurants and Radcom

0.03

Correlation Coefficient

BJs Restaurants  Radcom

Significant diversification

The 3 months correlation between BJs and Radcom is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Radcom go up and down completely randomly.

Pair Corralation between BJs Restaurants and Radcom

Given the investment horizon of 90 days BJs Restaurants is expected to under-perform the Radcom. But the stock apears to be less risky and, when comparing its historical volatility, BJs Restaurants is 1.86 times less risky than Radcom. The stock trades about -0.06 of its potential returns per unit of risk. The Radcom is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,160  in Radcom on December 19, 2024 and sell it today you would earn a total of  108.00  from holding Radcom or generate 9.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BJs Restaurants  vs.  Radcom

BJs Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days BJs Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Radcom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and Radcom

The main advantage of trading using opposite BJs Restaurants and Radcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants position performs unexpectedly, Radcom 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 Radcom will offset losses from the drop in Radcom's long position.

The idea behind BJs Restaurants and Radcom pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.