Correlation Between Cadence Design and BJs Restaurants

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

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

Diversification Opportunities for Cadence Design and BJs Restaurants

0.48

Correlation Coefficient

Cadence Design  BJs Restaurants

Very weak diversification

The 3 months correlation between Cadence and BJs is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Cadence Design 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 Cadence Design Systems 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 Cadence Design i.e., Cadence Design and BJs Restaurants go up and down completely randomly.

Pair Corralation between Cadence Design and BJs Restaurants

Given the investment horizon of 90 days Cadence Design is expected to generate 1.13 times less return on investment than BJs Restaurants. But when comparing it to its historical volatility, Cadence Design Systems is 1.01 times less risky than BJs Restaurants. It trades about 0.08 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,137  in BJs Restaurants on September 15, 2024 and sell it today you would earn a total of  445.00  from holding BJs Restaurants or generate 14.19% return on investment over 90 days.

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

Cadence Design Systems  vs.  BJs Restaurants

Cadence Design Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

BJs Restaurants

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, BJs Restaurants demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cadence Design and BJs Restaurants

The main advantage of trading using opposite Cadence Design and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design 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 Cadence Design Systems 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.