Correlation Between Papa Johns and Portillos

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

Diversification Opportunities for Papa Johns and Portillos

0.47

Correlation Coefficient

Papa Johns  Portillos

Very weak diversification

The 3 months correlation between Papa and Portillos is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Papa Johns International and Portillos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portillos 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 Portillos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portillos has no effect on the direction of Papa Johns i.e., Papa Johns and Portillos go up and down completely randomly.

Pair Corralation between Papa Johns and Portillos

Given the investment horizon of 90 days Papa Johns is expected to generate 4.4 times less return on investment than Portillos. But when comparing it to its historical volatility, Papa Johns International is 1.02 times less risky than Portillos. It trades about 0.03 of its potential returns per unit of risk. Portillos is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  910.00  in Portillos on December 29, 2024 and sell it today you would earn a total of  335.00  from holding Portillos or generate 36.81% return on investment over 90 days.

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

Papa Johns International  vs.  Portillos

Papa Johns International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Papa Johns International are ranked lower than 2 (%) 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 April 2025.

Portillos

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Portillos are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Portillos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Papa Johns and Portillos

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

The idea behind Papa Johns International and Portillos 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.