Correlation Between Rave Restaurant and Compass Group
Can any of the company-specific risk be diversified away by investing in both Rave Restaurant and Compass Group 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 Rave Restaurant and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rave Restaurant Group and Compass Group PLC, you can compare the effects of market volatilities on Rave Restaurant and Compass Group 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 Rave Restaurant with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rave Restaurant and Compass Group.
Diversification Opportunities for Rave Restaurant and Compass Group
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rave and Compass is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC and Rave Restaurant 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 Rave Restaurant Group are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Rave Restaurant i.e., Rave Restaurant and Compass Group go up and down completely randomly.
Pair Corralation between Rave Restaurant and Compass Group
Given the investment horizon of 90 days Rave Restaurant Group is expected to generate 2.49 times more return on investment than Compass Group. However, Rave Restaurant is 2.49 times more volatile than Compass Group PLC. It trades about 0.26 of its potential returns per unit of risk. Compass Group PLC is currently generating about 0.2 per unit of risk. If you would invest 266.00 in Rave Restaurant Group on September 13, 2024 and sell it today you would earn a total of 39.00 from holding Rave Restaurant Group or generate 14.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rave Restaurant Group vs. Compass Group PLC
Performance |
| Timeline |
| Rave Restaurant Group |
| Compass Group PLC |
Rave Restaurant and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rave Restaurant and Compass Group
The main advantage of trading using opposite Rave Restaurant and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rave Restaurant position performs unexpectedly, Compass Group 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 Compass Group will offset losses from the drop in Compass Group's long position.| Rave Restaurant vs. Ark Restaurants Corp | Rave Restaurant vs. One Group Hospitality | Rave Restaurant vs. Flanigans Enterprises | Rave Restaurant vs. Noble Romans |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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