Correlation Between Eastern and Ark Restaurants

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

By analyzing existing cross correlation between Eastern Co and Ark Restaurants Corp, you can compare the effects of market volatilities on Eastern and Ark Restaurants 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 Eastern with a short position of Ark Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Ark Restaurants.

Diversification Opportunities for Eastern and Ark Restaurants

0.33

Correlation Coefficient

Eastern  Ark Restaurants

Weak diversification

The 3 months correlation between Eastern and Ark is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp and Eastern 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 Eastern Co are associated (or correlated) with Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of Eastern i.e., Eastern and Ark Restaurants go up and down completely randomly.

Pair Corralation between Eastern and Ark Restaurants

Considering the 90-day investment horizon Eastern Co is expected to generate 1.12 times more return on investment than Ark Restaurants. However, Eastern is 1.12 times more volatile than Ark Restaurants Corp. It trades about 0.04 of its potential returns per unit of risk. Ark Restaurants Corp is currently generating about -0.01 per unit of risk. If you would invest  1,904  in Eastern Co on September 21, 2024 and sell it today you would earn a total of  895.00  from holding Eastern Co or generate 47.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.79%
Values	Daily Returns

Eastern Co  vs.  Ark Restaurants Corp

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Ark Restaurants Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ark Restaurants Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Ark Restaurants 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 Eastern and Ark Restaurants

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

The idea behind Eastern Co and Ark Restaurants Corp 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.