Correlation Between Stellar and Arcos Dorados
Can any of the company-specific risk be diversified away by investing in both Stellar and Arcos Dorados 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 Stellar and Arcos Dorados into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stellar and Arcos Dorados Holdings, you can compare the effects of market volatilities on Stellar and Arcos Dorados 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 Stellar with a short position of Arcos Dorados. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and Arcos Dorados.
Diversification Opportunities for Stellar and Arcos Dorados
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Stellar and Arcos is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Arcos Dorados Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcos Dorados Holdings and Stellar 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 Stellar are associated (or correlated) with Arcos Dorados. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcos Dorados Holdings has no effect on the direction of Stellar i.e., Stellar and Arcos Dorados go up and down completely randomly.
Pair Corralation between Stellar and Arcos Dorados
Assuming the 90 days trading horizon Stellar is expected to under-perform the Arcos Dorados. In addition to that, Stellar is 3.31 times more volatile than Arcos Dorados Holdings. It trades about -0.01 of its total potential returns per unit of risk. Arcos Dorados Holdings is currently generating about 0.13 per unit of volatility. If you would invest 750.00 in Arcos Dorados Holdings on November 2, 2024 and sell it today you would earn a total of 34.00 from holding Arcos Dorados Holdings or generate 4.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Stellar vs. Arcos Dorados Holdings
Performance |
| Timeline |
| Stellar |
| Arcos Dorados Holdings |
Stellar and Arcos Dorados Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stellar and Arcos Dorados
The main advantage of trading using opposite Stellar and Arcos Dorados positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar position performs unexpectedly, Arcos Dorados 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 Arcos Dorados will offset losses from the drop in Arcos Dorados' long position.The idea behind Stellar and Arcos Dorados Holdings 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.| Arcos Dorados vs. BJs Restaurants | Arcos Dorados vs. Dine Brands Global | Arcos Dorados vs. Brinker International | Arcos Dorados vs. Bloomin Brands |
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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