Correlation Between Ark Restaurants and United Utilities

Can any of the company-specific risk be diversified away by investing in both Ark Restaurants and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on Ark Restaurants and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ark Restaurants and United Utilities.

Diversification Opportunities for Ark Restaurants and United Utilities

-0.07

Correlation Coefficient

Ark Restaurants  United Utilities

Good diversification

The 3 months correlation between Ark and United is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ark Restaurants Corp and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Ark Restaurants i.e., Ark Restaurants and United Utilities go up and down completely randomly.

Pair Corralation between Ark Restaurants and United Utilities

Given the investment horizon of 90 days Ark Restaurants Corp is expected to generate 4.35 times more return on investment than United Utilities. However, Ark Restaurants is 4.35 times more volatile than United Utilities Group. It trades about 0.22 of its potential returns per unit of risk. United Utilities Group is currently generating about 0.07 per unit of risk. If you would invest  1,025  in Ark Restaurants Corp on September 17, 2024 and sell it today you would earn a total of  323.00  from holding Ark Restaurants Corp or generate 31.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ark Restaurants Corp  vs.  United Utilities Group

Ark Restaurants Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 5 (%) 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.

United Utilities

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, United Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ark Restaurants and United Utilities

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

The idea behind Ark Restaurants Corp and United Utilities Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.