Correlation Between Good Times and Golden Entertainment

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

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

Diversification Opportunities for Good Times and Golden Entertainment

-0.43

Correlation Coefficient

Good Times  Golden Entertainment

Very good diversification

The 3 months correlation between Good and Golden is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and Golden Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Entertainment and Good Times 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 Good Times Restaurants are associated (or correlated) with Golden Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Entertainment has no effect on the direction of Good Times i.e., Good Times and Golden Entertainment go up and down completely randomly.

Pair Corralation between Good Times and Golden Entertainment

Given the investment horizon of 90 days Good Times Restaurants is expected to generate 1.24 times more return on investment than Golden Entertainment. However, Good Times is 1.24 times more volatile than Golden Entertainment. It trades about 0.02 of its potential returns per unit of risk. Golden Entertainment is currently generating about 0.01 per unit of risk. If you would invest  240.00  in Good Times Restaurants on September 12, 2024 and sell it today you would earn a total of  31.00  from holding Good Times Restaurants or generate 12.92% return on investment over 90 days.

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

Good Times Restaurants  vs.  Golden Entertainment

Good Times Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Good Times is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Golden Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Entertainment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Golden Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Good Times and Golden Entertainment

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

The idea behind Good Times Restaurants and Golden Entertainment 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.