Correlation Between Good Times and Jollibee Foods

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

Diversification Opportunities for Good Times and Jollibee Foods

0.34

Correlation Coefficient

Good Times  Jollibee Foods

Weak diversification

The 3 months correlation between Good and Jollibee is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and Jollibee Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jollibee Foods Corp 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 Jollibee Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jollibee Foods Corp has no effect on the direction of Good Times i.e., Good Times and Jollibee Foods go up and down completely randomly.

Pair Corralation between Good Times and Jollibee Foods

Given the investment horizon of 90 days Good Times Restaurants is expected to under-perform the Jollibee Foods. But the stock apears to be less risky and, when comparing its historical volatility, Good Times Restaurants is 1.85 times less risky than Jollibee Foods. The stock trades about -0.09 of its potential returns per unit of risk. The Jollibee Foods Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,800  in Jollibee Foods Corp on December 4, 2024 and sell it today you would lose (165.00) from holding Jollibee Foods Corp or give up 9.17% of portfolio value over 90 days.

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

Good Times Restaurants  vs.  Jollibee Foods Corp

Good Times Restaurants

Risk-Adjusted Performance

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 latest inconsistent performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Jollibee Foods Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jollibee Foods Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Good Times and Jollibee Foods

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

The idea behind Good Times Restaurants and Jollibee Foods 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.