Correlation Between BJs Restaurants and GBS Software

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

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

Diversification Opportunities for BJs Restaurants and GBS Software

0.03

Correlation Coefficient

BJs Restaurants  GBS Software

Significant diversification

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

Pair Corralation between BJs Restaurants and GBS Software

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.36 times less return on investment than GBS Software. In addition to that, BJs Restaurants is 1.19 times more volatile than GBS Software AG. It trades about 0.03 of its total potential returns per unit of risk. GBS Software AG is currently generating about 0.04 per unit of volatility. If you would invest  214.00  in GBS Software AG on October 11, 2024 and sell it today you would earn a total of  90.00  from holding GBS Software AG or generate 42.06% 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.  GBS Software AG

BJs Restaurants

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 6 (%) 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.

GBS Software AG

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GBS Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and GBS Software

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

The idea behind BJs Restaurants and GBS Software AG 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.