Correlation Between Restaurant Brands and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both Restaurant Brands and Leons Furniture 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 Leons Furniture 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 Leons Furniture Limited, you can compare the effects of market volatilities on Restaurant Brands and Leons Furniture 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 Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Leons Furniture.
Diversification Opportunities for Restaurant Brands and Leons Furniture
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Restaurant and Leons is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture 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 Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Restaurant Brands i.e., Restaurant Brands and Leons Furniture go up and down completely randomly.
Pair Corralation between Restaurant Brands and Leons Furniture
Assuming the 90 days trading horizon Restaurant Brands International is expected to under-perform the Leons Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Restaurant Brands International is 1.14 times less risky than Leons Furniture. The stock trades about -0.16 of its potential returns per unit of risk. The Leons Furniture Limited is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 2,770 in Leons Furniture Limited on August 24, 2024 and sell it today you would lose (92.00) from holding Leons Furniture Limited or give up 3.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Restaurant Brands Internationa vs. Leons Furniture Limited
Performance |
| Timeline |
| Restaurant Brands |
| Leons Furniture |
Restaurant Brands and Leons Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Restaurant Brands and Leons Furniture
The main advantage of trading using opposite Restaurant Brands and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.| Restaurant Brands vs. Canadian Tire | Restaurant Brands vs. Dollarama | Restaurant Brands vs. Nutrien | Restaurant Brands vs. Magna International |
| Leons Furniture vs. Restaurant Brands International | Leons Furniture vs. Enghouse Systems | Leons Furniture vs. Metro Inc | Leons Furniture 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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