Correlation Between Cracker Barrel and CP ALL

Can any of the company-specific risk be diversified away by investing in both Cracker Barrel and CP ALL 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 Cracker Barrel and CP ALL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cracker Barrel Old and CP ALL Public, you can compare the effects of market volatilities on Cracker Barrel and CP ALL 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 Cracker Barrel with a short position of CP ALL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cracker Barrel and CP ALL.

Diversification Opportunities for Cracker Barrel and CP ALL

-0.57

Correlation Coefficient

Cracker Barrel  CP ALL

Excellent diversification

The 3 months correlation between Cracker and CVPBF is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cracker Barrel Old and CP ALL Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CP ALL Public and Cracker Barrel 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 Cracker Barrel Old are associated (or correlated) with CP ALL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CP ALL Public has no effect on the direction of Cracker Barrel i.e., Cracker Barrel and CP ALL go up and down completely randomly.

Pair Corralation between Cracker Barrel and CP ALL

Given the investment horizon of 90 days Cracker Barrel Old is expected to generate 1.25 times more return on investment than CP ALL. However, Cracker Barrel is 1.25 times more volatile than CP ALL Public. It trades about 0.04 of its potential returns per unit of risk. CP ALL Public is currently generating about -0.27 per unit of risk. If you would invest  5,556  in Cracker Barrel Old on September 29, 2024 and sell it today you would earn a total of  85.00  from holding Cracker Barrel Old or generate 1.53% return on investment over 90 days.

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

Cracker Barrel Old  vs.  CP ALL Public

Cracker Barrel Old

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cracker Barrel Old are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Cracker Barrel disclosed solid returns over the last few months and may actually be approaching a breakup point.

CP ALL Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cracker Barrel and CP ALL

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

The idea behind Cracker Barrel Old and CP ALL Public 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.