Correlation Between Good Times and GEN Restaurant
Can any of the company-specific risk be diversified away by investing in both Good Times and GEN Restaurant 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 Good Times and GEN Restaurant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Good Times Restaurants and GEN Restaurant Group,, you can compare the effects of market volatilities on Good Times and GEN Restaurant 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 Good Times with a short position of GEN Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Good Times and GEN Restaurant.
Diversification Opportunities for Good Times and GEN Restaurant
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Good and GEN is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and GEN Restaurant Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEN Restaurant Group, and Good Times 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 Good Times Restaurants are associated (or correlated) with GEN Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEN Restaurant Group, has no effect on the direction of Good Times i.e., Good Times and GEN Restaurant go up and down completely randomly.
Pair Corralation between Good Times and GEN Restaurant
Given the investment horizon of 90 days Good Times Restaurants is expected to under-perform the GEN Restaurant. But the stock apears to be less risky and, when comparing its historical volatility, Good Times Restaurants is 2.14 times less risky than GEN Restaurant. The stock trades about -0.05 of its potential returns per unit of risk. The GEN Restaurant Group, is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 827.00 in GEN Restaurant Group, on September 14, 2024 and sell it today you would lose (7.00) from holding GEN Restaurant Group, or give up 0.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Good Times Restaurants vs. GEN Restaurant Group,
Performance |
| Timeline |
| Good Times Restaurants |
| GEN Restaurant Group, |
Good Times and GEN Restaurant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Good Times and GEN Restaurant
The main advantage of trading using opposite Good Times and GEN Restaurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Good Times position performs unexpectedly, GEN Restaurant 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 GEN Restaurant will offset losses from the drop in GEN Restaurant's long position.The idea behind Good Times Restaurants and GEN Restaurant Group, 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.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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