Correlation Between Noodles and Good Times

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

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

Diversification Opportunities for Noodles and Good Times

0.79

Correlation Coefficient

Noodles  Good Times

Poor diversification

The 3 months correlation between Noodles and Good is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Noodles Company and Good Times Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Times Restaurants and Noodles 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 Noodles Company are associated (or correlated) with Good Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Times Restaurants has no effect on the direction of Noodles i.e., Noodles and Good Times go up and down completely randomly.

Pair Corralation between Noodles and Good Times

Given the investment horizon of 90 days Noodles Company is expected to generate 4.32 times more return on investment than Good Times. However, Noodles is 4.32 times more volatile than Good Times Restaurants. It trades about 0.1 of its potential returns per unit of risk. Good Times Restaurants is currently generating about -0.07 per unit of risk. If you would invest  71.00  in Noodles Company on October 22, 2024 and sell it today you would earn a total of  15.00  from holding Noodles Company or generate 21.13% return on investment over 90 days.

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

Noodles Company  vs.  Good Times Restaurants

Noodles Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noodles Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 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.

Pair Trading with Noodles and Good Times

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

The idea behind Noodles Company and Good Times Restaurants 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.