Correlation Between Restaurant Brands and Aritzia
Can any of the company-specific risk be diversified away by investing in both Restaurant Brands and Aritzia 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 Restaurant Brands and Aritzia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Restaurant Brands International and Aritzia, you can compare the effects of market volatilities on Restaurant Brands and Aritzia 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 Restaurant Brands with a short position of Aritzia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Aritzia.
Diversification Opportunities for Restaurant Brands and Aritzia
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Restaurant and Aritzia is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Aritzia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aritzia and Restaurant Brands 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 Restaurant Brands International are associated (or correlated) with Aritzia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aritzia has no effect on the direction of Restaurant Brands i.e., Restaurant Brands and Aritzia go up and down completely randomly.
Pair Corralation between Restaurant Brands and Aritzia
Assuming the 90 days trading horizon Restaurant Brands International is expected to generate 0.41 times more return on investment than Aritzia. However, Restaurant Brands International is 2.45 times less risky than Aritzia. It trades about 0.03 of its potential returns per unit of risk. Aritzia is currently generating about 0.01 per unit of risk. If you would invest 8,667 in Restaurant Brands International on August 30, 2024 and sell it today you would earn a total of 1,179 from holding Restaurant Brands International or generate 13.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Restaurant Brands Internationa vs. Aritzia
Performance |
| Timeline |
| Restaurant Brands |
| Aritzia |
Restaurant Brands and Aritzia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Restaurant Brands and Aritzia
The main advantage of trading using opposite Restaurant Brands and Aritzia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands position performs unexpectedly, Aritzia 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 Aritzia will offset losses from the drop in Aritzia's long position.| Restaurant Brands vs. Canadian Tire | Restaurant Brands vs. Dollarama | Restaurant Brands vs. Nutrien | Restaurant Brands vs. Magna International |
| Aritzia vs. Canada Goose Holdings | Aritzia vs. Restaurant Brands International | Aritzia vs. Lightspeed Commerce | Aritzia vs. goeasy |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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