Correlation Between Rave Restaurant and Corporacion America

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

By analyzing existing cross correlation between Rave Restaurant Group and Corporacion America Airports, you can compare the effects of market volatilities on Rave Restaurant and Corporacion America 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 Rave Restaurant with a short position of Corporacion America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rave Restaurant and Corporacion America.

Diversification Opportunities for Rave Restaurant and Corporacion America

0.84

Correlation Coefficient

Rave Restaurant  Corporacion America

Very poor diversification

The 3 months correlation between Rave and Corporacion is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and Corporacion America Airports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporacion America and Rave Restaurant 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 Rave Restaurant Group are associated (or correlated) with Corporacion America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporacion America has no effect on the direction of Rave Restaurant i.e., Rave Restaurant and Corporacion America go up and down completely randomly.

Pair Corralation between Rave Restaurant and Corporacion America

Given the investment horizon of 90 days Rave Restaurant Group is expected to under-perform the Corporacion America. In addition to that, Rave Restaurant is 1.04 times more volatile than Corporacion America Airports. It trades about -0.04 of its total potential returns per unit of risk. Corporacion America Airports is currently generating about 0.02 per unit of volatility. If you would invest  1,686  in Corporacion America Airports on February 1, 2024 and sell it today you would earn a total of  8.00  from holding Corporacion America Airports or generate 0.47% return on investment over 90 days.

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

Rave Restaurant Group  vs.  Corporacion America Airports

Rave Restaurant Group

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rave Restaurant may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Corporacion America

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Corporacion America Airports are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Corporacion America may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Rave Restaurant and Corporacion America

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

The idea behind Rave Restaurant Group and Corporacion America Airports 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.