Correlation Between Papa Johns and Smart Share

Can any of the company-specific risk be diversified away by investing in both Papa Johns and Smart Share 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 Smart Share 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 Smart Share Global, you can compare the effects of market volatilities on Papa Johns and Smart Share 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 Smart Share. Check out your portfolio center. Please also check ongoing floating volatility patterns of Papa Johns and Smart Share.

Diversification Opportunities for Papa Johns and Smart Share

0.25

Correlation Coefficient

Papa Johns  Smart Share

Modest diversification

The 3 months correlation between Papa and Smart is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Papa Johns International and Smart Share Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Share Global 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 Smart Share. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Share Global has no effect on the direction of Papa Johns i.e., Papa Johns and Smart Share go up and down completely randomly.

Pair Corralation between Papa Johns and Smart Share

Given the investment horizon of 90 days Papa Johns International is expected to under-perform the Smart Share. But the stock apears to be less risky and, when comparing its historical volatility, Papa Johns International is 2.23 times less risky than Smart Share. The stock trades about -0.04 of its potential returns per unit of risk. The Smart Share Global is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Smart Share Global on September 2, 2024 and sell it today you would lose (26.00) from holding Smart Share Global or give up 26.26% of portfolio value over 90 days.

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

Papa Johns International  vs.  Smart Share Global

Papa Johns International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papa Johns International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Papa Johns may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Smart Share Global

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Papa Johns and Smart Share

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

The idea behind Papa Johns International and Smart Share Global 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.