Correlation Between Kingdee International and BJs Restaurants

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

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

Diversification Opportunities for Kingdee International and BJs Restaurants

0.2

Correlation Coefficient

Kingdee International  BJs Restaurants

Modest diversification

The 3 months correlation between Kingdee and BJs is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Kingdee International 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 Kingdee International Software 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 Kingdee International i.e., Kingdee International and BJs Restaurants go up and down completely randomly.

Pair Corralation between Kingdee International and BJs Restaurants

Assuming the 90 days trading horizon Kingdee International Software is expected to generate 1.39 times more return on investment than BJs Restaurants. However, Kingdee International is 1.39 times more volatile than BJs Restaurants. It trades about 0.07 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.0 per unit of risk. If you would invest  98.00  in Kingdee International Software on October 27, 2024 and sell it today you would earn a total of  12.00  from holding Kingdee International Software or generate 12.24% return on investment over 90 days.

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

Kingdee International Software  vs.  BJs Restaurants

Kingdee International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kingdee International Software are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Kingdee International reported solid returns over the last few months and may actually be approaching a breakup point.

BJs Restaurants

Risk-Adjusted Performance

0 of 100

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kingdee International and BJs Restaurants

The main advantage of trading using opposite Kingdee International and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingdee International 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 Kingdee International Software 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.