Correlation Between Cracker Barrel and LuxUrban Hotels

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

Diversification Opportunities for Cracker Barrel and LuxUrban Hotels

-0.74

Correlation Coefficient

Cracker Barrel  LuxUrban Hotels

Pay attention - limited upside

The 3 months correlation between Cracker and LuxUrban is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cracker Barrel Old and LuxUrban Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LuxUrban Hotels 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 LuxUrban Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LuxUrban Hotels has no effect on the direction of Cracker Barrel i.e., Cracker Barrel and LuxUrban Hotels go up and down completely randomly.

Pair Corralation between Cracker Barrel and LuxUrban Hotels

Given the investment horizon of 90 days Cracker Barrel Old is expected to generate 0.34 times more return on investment than LuxUrban Hotels. However, Cracker Barrel Old is 2.98 times less risky than LuxUrban Hotels. It trades about -0.03 of its potential returns per unit of risk. LuxUrban Hotels is currently generating about -0.08 per unit of risk. If you would invest  9,746  in Cracker Barrel Old on October 7, 2024 and sell it today you would lose (4,152) from holding Cracker Barrel Old or give up 42.6% of portfolio value over 90 days.

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

Cracker Barrel Old  vs.  LuxUrban Hotels

Cracker Barrel Old

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cracker Barrel Old are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Cracker Barrel disclosed solid returns over the last few months and may actually be approaching a breakup point.

LuxUrban Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LuxUrban Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Cracker Barrel and LuxUrban Hotels

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

The idea behind Cracker Barrel Old and LuxUrban Hotels 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.