Correlation Between BJs Restaurants and SK TELECOM

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

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

Diversification Opportunities for BJs Restaurants and SK TELECOM

0.71

Correlation Coefficient

BJs Restaurants  SK TELECOM

Poor diversification

The 3 months correlation between BJs and KMBA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and SK TELECOM TDADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK TELECOM TDADR 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 SK TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK TELECOM TDADR has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and SK TELECOM go up and down completely randomly.

Pair Corralation between BJs Restaurants and SK TELECOM

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.43 times more return on investment than SK TELECOM. However, BJs Restaurants is 1.43 times more volatile than SK TELECOM TDADR. It trades about 0.0 of its potential returns per unit of risk. SK TELECOM TDADR is currently generating about -0.04 per unit of risk. If you would invest  3,320  in BJs Restaurants on December 28, 2024 and sell it today you would lose (40.00) from holding BJs Restaurants or give up 1.2% of portfolio value over 90 days.

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

BJs Restaurants  vs.  SK TELECOM TDADR

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

SK TELECOM TDADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SK TELECOM TDADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, SK TELECOM is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BJs Restaurants and SK TELECOM

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

The idea behind BJs Restaurants and SK TELECOM TDADR 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.