Correlation Between Ark Restaurants and Talon Energy

Can any of the company-specific risk be diversified away by investing in both Ark Restaurants and Talon Energy 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 Ark Restaurants and Talon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ark Restaurants Corp and Talon Energy, you can compare the effects of market volatilities on Ark Restaurants and Talon Energy 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 Ark Restaurants with a short position of Talon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ark Restaurants and Talon Energy.

Diversification Opportunities for Ark Restaurants and Talon Energy

0.13

Correlation Coefficient

Ark Restaurants  Talon Energy

Average diversification

The 3 months correlation between Ark and Talon is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ark Restaurants Corp and Talon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon Energy and Ark Restaurants 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 Ark Restaurants Corp are associated (or correlated) with Talon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon Energy has no effect on the direction of Ark Restaurants i.e., Ark Restaurants and Talon Energy go up and down completely randomly.

Pair Corralation between Ark Restaurants and Talon Energy

Given the investment horizon of 90 days Ark Restaurants Corp is expected to under-perform the Talon Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ark Restaurants Corp is 32.72 times less risky than Talon Energy. The stock trades about 0.0 of its potential returns per unit of risk. The Talon Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Talon Energy on October 6, 2024 and sell it today you would earn a total of  4.40  from holding Talon Energy or generate 733.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	23.5%
Values	Daily Returns

Ark Restaurants Corp  vs.  Talon Energy

Ark Restaurants Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking signals, Ark Restaurants reported solid returns over the last few months and may actually be approaching a breakup point.

Talon Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Talon Energy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ark Restaurants and Talon Energy

The main advantage of trading using opposite Ark Restaurants and Talon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ark Restaurants position performs unexpectedly, Talon Energy 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 Talon Energy will offset losses from the drop in Talon Energy's long position.

The idea behind Ark Restaurants Corp and Talon Energy 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.