Correlation Between Cracker Barrel and LOEWS

Can any of the company-specific risk be diversified away by investing in both Cracker Barrel and LOEWS 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 LOEWS 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 LOEWS P 6, you can compare the effects of market volatilities on Cracker Barrel and LOEWS 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 LOEWS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cracker Barrel and LOEWS.

Diversification Opportunities for Cracker Barrel and LOEWS

-0.41

Correlation Coefficient

Cracker Barrel  LOEWS

Very good diversification

The 3 months correlation between Cracker and LOEWS is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cracker Barrel Old and LOEWS P 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOEWS P 6 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 LOEWS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOEWS P 6 has no effect on the direction of Cracker Barrel i.e., Cracker Barrel and LOEWS go up and down completely randomly.

Pair Corralation between Cracker Barrel and LOEWS

Given the investment horizon of 90 days Cracker Barrel Old is expected to under-perform the LOEWS. In addition to that, Cracker Barrel is 2.77 times more volatile than LOEWS P 6. It trades about -0.03 of its total potential returns per unit of risk. LOEWS P 6 is currently generating about 0.0 per unit of volatility. If you would invest  10,905  in LOEWS P 6 on October 25, 2024 and sell it today you would lose (225.00) from holding LOEWS P 6 or give up 2.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	79.72%
Values	Daily Returns

Cracker Barrel Old  vs.  LOEWS P 6

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 uncertain basic indicators, Cracker Barrel disclosed solid returns over the last few months and may actually be approaching a breakup point.

LOEWS P 6

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOEWS P 6 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOEWS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cracker Barrel and LOEWS

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

The idea behind Cracker Barrel Old and LOEWS P 6 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.