Correlation Between Portillos and Good Times
Can any of the company-specific risk be diversified away by investing in both Portillos and Good Times 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 Portillos and Good Times into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Portillos and Good Times Restaurants, you can compare the effects of market volatilities on Portillos and Good Times 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 Portillos with a short position of Good Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of Portillos and Good Times.
Diversification Opportunities for Portillos and Good Times
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Portillos and Good is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Portillos and Good Times Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Times Restaurants and Portillos 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 Portillos are associated (or correlated) with Good Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Times Restaurants has no effect on the direction of Portillos i.e., Portillos and Good Times go up and down completely randomly.
Pair Corralation between Portillos and Good Times
Given the investment horizon of 90 days Portillos is expected to under-perform the Good Times. In addition to that, Portillos is 1.09 times more volatile than Good Times Restaurants. It trades about -0.06 of its total potential returns per unit of risk. Good Times Restaurants is currently generating about 0.04 per unit of volatility. If you would invest 232.00 in Good Times Restaurants on September 14, 2024 and sell it today you would earn a total of 38.00 from holding Good Times Restaurants or generate 16.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Portillos vs. Good Times Restaurants
Performance |
| Timeline |
| Portillos |
| Good Times Restaurants |
Portillos and Good Times Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Portillos and Good Times
The main advantage of trading using opposite Portillos and Good Times positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Portillos position performs unexpectedly, Good Times 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 Good Times will offset losses from the drop in Good Times' long position.The idea behind Portillos and Good Times Restaurants 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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