Correlation Between Carriage Services and Restaurant Brands

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

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

Diversification Opportunities for Carriage Services and Restaurant Brands

-0.3

Correlation Coefficient

Carriage Services  Restaurant Brands

Very good diversification

The 3 months correlation between Carriage and Restaurant is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Carriage Services and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant Brands and Carriage Services 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 Carriage Services are associated (or correlated) with Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of Carriage Services i.e., Carriage Services and Restaurant Brands go up and down completely randomly.

Pair Corralation between Carriage Services and Restaurant Brands

Considering the 90-day investment horizon Carriage Services is expected to under-perform the Restaurant Brands. In addition to that, Carriage Services is 1.02 times more volatile than Restaurant Brands International. It trades about -0.05 of its total potential returns per unit of risk. Restaurant Brands International is currently generating about 0.03 per unit of volatility. If you would invest  6,560  in Restaurant Brands International on December 21, 2024 and sell it today you would earn a total of  140.00  from holding Restaurant Brands International or generate 2.13% return on investment over 90 days.

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

Carriage Services  vs.  Restaurant Brands Internationa

Carriage Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carriage Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carriage Services is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Restaurant Brands

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Restaurant Brands International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Restaurant Brands is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Carriage Services and Restaurant Brands

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

The idea behind Carriage Services and Restaurant Brands International 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.