Correlation Between CHINA SOUTHN and BJs Restaurants

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

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

Diversification Opportunities for CHINA SOUTHN and BJs Restaurants

-0.07

Correlation Coefficient

CHINA SOUTHN  BJs Restaurants

Good diversification

The 3 months correlation between CHINA and BJs is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 CHINA SOUTHN i.e., CHINA SOUTHN and BJs Restaurants go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and BJs Restaurants

Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to generate 1.4 times more return on investment than BJs Restaurants. However, CHINA SOUTHN is 1.4 times more volatile than BJs Restaurants. It trades about -0.05 of its potential returns per unit of risk. BJs Restaurants is currently generating about -0.08 per unit of risk. If you would invest  51.00  in CHINA SOUTHN AIR H on December 21, 2024 and sell it today you would lose (5.00) from holding CHINA SOUTHN AIR H or give up 9.8% of portfolio value over 90 days.

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

CHINA SOUTHN AIR H   vs.  BJs Restaurants

CHINA SOUTHN AIR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA SOUTHN AIR H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with CHINA SOUTHN and BJs Restaurants

The main advantage of trading using opposite CHINA SOUTHN and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.