Correlation Between Highlight Communications and BJs Restaurants

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

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

Diversification Opportunities for Highlight Communications and BJs Restaurants

-0.11

Correlation Coefficient

Highlight Communications  BJs Restaurants

Good diversification

The 3 months correlation between Highlight and BJs is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Highlight Communications 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 Highlight Communications AG are associated (or correlated) with BJs Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Restaurants has no effect on the direction of Highlight Communications i.e., Highlight Communications and BJs Restaurants go up and down completely randomly.

Pair Corralation between Highlight Communications and BJs Restaurants

Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 2.44 times more return on investment than BJs Restaurants. However, Highlight Communications is 2.44 times more volatile than BJs Restaurants. It trades about 0.0 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.01 per unit of risk. If you would invest  118.00  in Highlight Communications AG on December 1, 2024 and sell it today you would lose (7.00) from holding Highlight Communications AG or give up 5.93% of portfolio value over 90 days.

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

Highlight Communications AG  vs.  BJs Restaurants

Highlight Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highlight Communications AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Highlight Communications is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of comparatively stable basic indicators, BJs Restaurants is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Highlight Communications and BJs Restaurants

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

The idea behind Highlight Communications AG and BJs Restaurants 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.