Correlation Between Rave Restaurant and LianDi Clean
Can any of the company-specific risk be diversified away by investing in both Rave Restaurant and LianDi Clean 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 LianDi Clean 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 LianDi Clean Technology, you can compare the effects of market volatilities on Rave Restaurant and LianDi Clean 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 LianDi Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rave Restaurant and LianDi Clean.
Diversification Opportunities for Rave Restaurant and LianDi Clean
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Rave and LianDi is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and LianDi Clean Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LianDi Clean Technology 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 LianDi Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LianDi Clean Technology has no effect on the direction of Rave Restaurant i.e., Rave Restaurant and LianDi Clean go up and down completely randomly.
Pair Corralation between Rave Restaurant and LianDi Clean
Given the investment horizon of 90 days Rave Restaurant Group is expected to generate 0.17 times more return on investment than LianDi Clean. However, Rave Restaurant Group is 5.76 times less risky than LianDi Clean. It trades about -0.17 of its potential returns per unit of risk. LianDi Clean Technology is currently generating about -0.21 per unit of risk. If you would invest 270.00 in Rave Restaurant Group on November 4, 2024 and sell it today you would lose (17.00) from holding Rave Restaurant Group or give up 6.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Rave Restaurant Group vs. LianDi Clean Technology
Performance |
| Timeline |
| Rave Restaurant Group |
| LianDi Clean Technology |
Rave Restaurant and LianDi Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rave Restaurant and LianDi Clean
The main advantage of trading using opposite Rave Restaurant and LianDi Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rave Restaurant position performs unexpectedly, LianDi Clean 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 LianDi Clean will offset losses from the drop in LianDi Clean'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 |
| LianDi Clean vs. Enerflex | LianDi Clean vs. Natural Gas Services | LianDi Clean vs. Archrock | LianDi Clean vs. Geospace Technologies |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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