Correlation Between Restaurant Brands and MTY Food

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

By analyzing existing cross correlation between Restaurant Brands International and MTY Food Group, you can compare the effects of market volatilities on Restaurant Brands and MTY Food 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 Restaurant Brands with a short position of MTY Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and MTY Food.

Diversification Opportunities for Restaurant Brands and MTY Food

-0.45

Correlation Coefficient

Restaurant Brands  MTY Food

Very good diversification

The 3 months correlation between Restaurant and MTY is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and MTY Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTY Food Group and Restaurant Brands 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 Restaurant Brands International are associated (or correlated) with MTY Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTY Food Group has no effect on the direction of Restaurant Brands i.e., Restaurant Brands and MTY Food go up and down completely randomly.

Pair Corralation between Restaurant Brands and MTY Food

Assuming the 90 days trading horizon Restaurant Brands International is expected to generate 0.63 times more return on investment than MTY Food. However, Restaurant Brands International is 1.58 times less risky than MTY Food. It trades about 0.01 of its potential returns per unit of risk. MTY Food Group is currently generating about -0.05 per unit of risk. If you would invest  9,256  in Restaurant Brands International on December 30, 2024 and sell it today you would lose (15.00) from holding Restaurant Brands International or give up 0.16% of portfolio value over 90 days.

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

Restaurant Brands Internationa  vs.  MTY Food Group

Restaurant Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Restaurant Brands International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Restaurant Brands is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

MTY Food Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days MTY Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic 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 Restaurant Brands and MTY Food

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

The idea behind Restaurant Brands International and MTY Food Group 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.