Correlation Between HomeToGo and BJs Restaurants

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

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

Diversification Opportunities for HomeToGo and BJs Restaurants

0.44

Correlation Coefficient

HomeToGo  BJs Restaurants

Very weak diversification

The 3 months correlation between HomeToGo and BJs is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding HomeToGo SE and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and HomeToGo 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 HomeToGo SE 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 HomeToGo i.e., HomeToGo and BJs Restaurants go up and down completely randomly.

Pair Corralation between HomeToGo and BJs Restaurants

Assuming the 90 days trading horizon HomeToGo is expected to generate 5.38 times less return on investment than BJs Restaurants. In addition to that, HomeToGo is 1.24 times more volatile than BJs Restaurants. It trades about 0.02 of its total potential returns per unit of risk. BJs Restaurants is currently generating about 0.12 per unit of volatility. If you would invest  2,960  in BJs Restaurants on October 8, 2024 and sell it today you would earn a total of  560.00  from holding BJs Restaurants or generate 18.92% return on investment over 90 days.

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

HomeToGo SE  vs.  BJs Restaurants

HomeToGo SE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HomeToGo SE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, HomeToGo 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BJs Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HomeToGo and BJs Restaurants

The main advantage of trading using opposite HomeToGo and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeToGo 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 HomeToGo SE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.