Correlation Between El Pollo and Ark Restaurants
Can any of the company-specific risk be diversified away by investing in both El Pollo and Ark 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 El Pollo and Ark Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Pollo Loco and Ark Restaurants Corp, you can compare the effects of market volatilities on El Pollo and Ark 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 El Pollo with a short position of Ark Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Pollo and Ark Restaurants.
Diversification Opportunities for El Pollo and Ark Restaurants
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LOCO and Ark is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding El Pollo Loco and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp and El Pollo 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 El Pollo Loco are associated (or correlated) with Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of El Pollo i.e., El Pollo and Ark Restaurants go up and down completely randomly.
Pair Corralation between El Pollo and Ark Restaurants
Given the investment horizon of 90 days El Pollo Loco is expected to generate 1.45 times more return on investment than Ark Restaurants. However, El Pollo is 1.45 times more volatile than Ark Restaurants Corp. It trades about 0.04 of its potential returns per unit of risk. Ark Restaurants Corp is currently generating about -0.32 per unit of risk. If you would invest 1,255 in El Pollo Loco on August 28, 2024 and sell it today you would earn a total of 21.00 from holding El Pollo Loco or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
El Pollo Loco vs. Ark Restaurants Corp
Performance |
| Timeline |
| El Pollo Loco |
| Ark Restaurants Corp |
El Pollo and Ark Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with El Pollo and Ark Restaurants
The main advantage of trading using opposite El Pollo and Ark Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Pollo position performs unexpectedly, Ark 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 Ark Restaurants will offset losses from the drop in Ark Restaurants' long position.| El Pollo vs. FAT Brands | El Pollo vs. Potbelly Co | El Pollo vs. BJs Restaurants | El Pollo vs. One Group Hospitality |
| Ark Restaurants vs. Nathans Famous | Ark Restaurants vs. Flanigans Enterprises | Ark Restaurants vs. Good Times Restaurants | Ark Restaurants vs. Auburn National Bancorporation |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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