Correlation Between CAVA Group, and GEN Restaurant

Can any of the company-specific risk be diversified away by investing in both CAVA Group, and GEN Restaurant 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 CAVA Group, and GEN Restaurant into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CAVA Group, and GEN Restaurant Group,, you can compare the effects of market volatilities on CAVA Group, and GEN Restaurant 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 CAVA Group, with a short position of GEN Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAVA Group, and GEN Restaurant.

Diversification Opportunities for CAVA Group, and GEN Restaurant

0.29

Correlation Coefficient

CAVA Group,  GEN Restaurant

Modest diversification

The 3 months correlation between CAVA and GEN is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CAVA Group, and GEN Restaurant Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEN Restaurant Group, and CAVA Group, 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 CAVA Group, are associated (or correlated) with GEN Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEN Restaurant Group, has no effect on the direction of CAVA Group, i.e., CAVA Group, and GEN Restaurant go up and down completely randomly.

Pair Corralation between CAVA Group, and GEN Restaurant

Given the investment horizon of 90 days CAVA Group, is expected to generate 0.67 times more return on investment than GEN Restaurant. However, CAVA Group, is 1.48 times less risky than GEN Restaurant. It trades about 0.03 of its potential returns per unit of risk. GEN Restaurant Group, is currently generating about 0.0 per unit of risk. If you would invest  12,430  in CAVA Group, on September 18, 2024 and sell it today you would earn a total of  249.00  from holding CAVA Group, or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CAVA Group,  vs.  GEN Restaurant Group,

CAVA Group,

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CAVA Group, are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CAVA Group, is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, GEN Restaurant is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CAVA Group, and GEN Restaurant

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

The idea behind CAVA Group, and GEN Restaurant 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.

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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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.