Correlation Between BJs Restaurants and RCM TECHNOLOGIES

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

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

Diversification Opportunities for BJs Restaurants and RCM TECHNOLOGIES

0.78

Correlation Coefficient

BJs Restaurants  RCM TECHNOLOGIES

Poor diversification

The 3 months correlation between BJs and RCM is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and RCM TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCM TECHNOLOGIES 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 RCM TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCM TECHNOLOGIES has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and RCM TECHNOLOGIES go up and down completely randomly.

Pair Corralation between BJs Restaurants and RCM TECHNOLOGIES

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.91 times less return on investment than RCM TECHNOLOGIES. In addition to that, BJs Restaurants is 1.21 times more volatile than RCM TECHNOLOGIES. It trades about 0.09 of its total potential returns per unit of risk. RCM TECHNOLOGIES is currently generating about 0.21 per unit of volatility. If you would invest  2,000  in RCM TECHNOLOGIES on September 21, 2024 and sell it today you would earn a total of  160.00  from holding RCM TECHNOLOGIES or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.36%
Values	Daily Returns

BJs Restaurants  vs.  RCM TECHNOLOGIES

BJs Restaurants

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BJs Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

RCM TECHNOLOGIES

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCM TECHNOLOGIES are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, RCM TECHNOLOGIES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BJs Restaurants and RCM TECHNOLOGIES

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

The idea behind BJs Restaurants and RCM TECHNOLOGIES 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.