Correlation Between Noodles and Marstons PLC

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

By analyzing existing cross correlation between Noodles Company and Marstons PLC, you can compare the effects of market volatilities on Noodles and Marstons PLC 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 Marstons PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noodles and Marstons PLC.

Diversification Opportunities for Noodles and Marstons PLC

0.55

Correlation Coefficient

Noodles  Marstons PLC

Very weak diversification

The 3 months correlation between Noodles and Marstons is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Noodles Company and Marstons PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marstons PLC 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 Marstons PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marstons PLC has no effect on the direction of Noodles i.e., Noodles and Marstons PLC go up and down completely randomly.

Pair Corralation between Noodles and Marstons PLC

Given the investment horizon of 90 days Noodles Company is expected to generate 2.29 times more return on investment than Marstons PLC. However, Noodles is 2.29 times more volatile than Marstons PLC. It trades about 0.17 of its potential returns per unit of risk. Marstons PLC is currently generating about 0.03 per unit of risk. If you would invest  60.00  in Noodles Company on December 30, 2024 and sell it today you would earn a total of  53.00  from holding Noodles Company or generate 88.33% return on investment over 90 days.

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

Noodles Company  vs.  Marstons PLC

Noodles Company

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Noodles Company are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Noodles unveiled solid returns over the last few months and may actually be approaching a breakup point.

Marstons PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marstons PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Marstons PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Noodles and Marstons PLC

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

The idea behind Noodles Company and Marstons PLC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.