Correlation Between Papa Johns and Patterson Companies

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

By analyzing existing cross correlation between Papa Johns International and Patterson Companies, you can compare the effects of market volatilities on Papa Johns and Patterson Companies 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 Papa Johns with a short position of Patterson Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Papa Johns and Patterson Companies.

Diversification Opportunities for Papa Johns and Patterson Companies

-0.72

Correlation Coefficient

Papa Johns  Patterson Companies

Pay attention - limited upside

The 3 months correlation between Papa and Patterson is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Papa Johns International and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies and Papa Johns 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 Papa Johns International are associated (or correlated) with Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Papa Johns i.e., Papa Johns and Patterson Companies go up and down completely randomly.

Pair Corralation between Papa Johns and Patterson Companies

Assuming the 90 days horizon Papa Johns International is expected to under-perform the Patterson Companies. But the stock apears to be less risky and, when comparing its historical volatility, Papa Johns International is 2.18 times less risky than Patterson Companies. The stock trades about -0.17 of its potential returns per unit of risk. The Patterson Companies is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,180  in Patterson Companies on October 11, 2024 and sell it today you would earn a total of  800.00  from holding Patterson Companies or generate 36.7% return on investment over 90 days.

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

Papa Johns International  vs.  Patterson Companies

Papa Johns International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Papa Johns International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Patterson Companies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Patterson Companies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Papa Johns and Patterson Companies

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

The idea behind Papa Johns International and Patterson Companies 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.