Correlation Between Cisco Systems and BJs Restaurants
Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and BJs Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and BJs Restaurants, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and BJs Restaurants.
Diversification Opportunities for Cisco Systems and BJs Restaurants
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cisco and BJs is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants and Cisco Systems 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 Cisco 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 Cisco Systems i.e., Cisco Systems and BJs Restaurants go up and down completely randomly.
Pair Corralation between Cisco Systems and BJs Restaurants
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.54 times less return on investment than BJs Restaurants. But when comparing it to its historical volatility, Cisco Systems is 2.01 times less risky than BJs Restaurants. It trades about 0.05 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,180 in BJs Restaurants on March 21, 2025 and sell it today you would earn a total of 1,351 from holding BJs Restaurants or generate 42.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. BJs Restaurants
Performance |
| Timeline |
| Cisco Systems |
| BJs Restaurants |
Cisco Systems and BJs Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and BJs Restaurants
The main advantage of trading using opposite Cisco Systems and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.| Cisco Systems vs. ADTRAN Inc | Cisco Systems vs. KVH Industries | Cisco Systems vs. Telesat Corp | Cisco Systems vs. Digi International |
| BJs Restaurants vs. Dine Brands Global | BJs Restaurants vs. Brinker International | BJs Restaurants vs. Bloomin Brands | BJs Restaurants vs. The Cheesecake Factory |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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