Correlation Between Ark Restaurants and Wingstop

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

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

Diversification Opportunities for Ark Restaurants and Wingstop

0.2

Correlation Coefficient

Ark Restaurants  Wingstop

Modest diversification

The 3 months correlation between Ark and Wingstop is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ark Restaurants Corp and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop and Ark 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 Ark Restaurants Corp are associated (or correlated) with Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of Ark Restaurants i.e., Ark Restaurants and Wingstop go up and down completely randomly.

Pair Corralation between Ark Restaurants and Wingstop

Given the investment horizon of 90 days Ark Restaurants is expected to generate 160.77 times less return on investment than Wingstop. But when comparing it to its historical volatility, Ark Restaurants Corp is 1.02 times less risky than Wingstop. It trades about 0.0 of its potential returns per unit of risk. Wingstop is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  15,843  in Wingstop on February 28, 2024 and sell it today you would earn a total of  22,546  from holding Wingstop or generate 142.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.85%
Values	Daily Returns

Ark Restaurants Corp  vs.  Wingstop

Ark Restaurants Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting forward-looking signals, Ark Restaurants may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Wingstop

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wingstop are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Wingstop may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Ark Restaurants and Wingstop

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

The idea behind Ark Restaurants Corp and Wingstop 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 Anywhere module to track or share privately all of your investments from the convenience of any device.