Correlation Between Restaurant Brands and Vail Resorts

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

Diversification Opportunities for Restaurant Brands and Vail Resorts

-0.47

Correlation Coefficient

Restaurant Brands  Vail Resorts

Very good diversification

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

Pair Corralation between Restaurant Brands and Vail Resorts

Considering the 90-day investment horizon Restaurant Brands International is expected to generate 0.75 times more return on investment than Vail Resorts. However, Restaurant Brands International is 1.32 times less risky than Vail Resorts. It trades about 0.0 of its potential returns per unit of risk. Vail Resorts is currently generating about -0.04 per unit of risk. If you would invest  7,112  in Restaurant Brands International on August 31, 2024 and sell it today you would lose (151.00) from holding Restaurant Brands International or give up 2.12% 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.  Vail Resorts

Restaurant Brands

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Restaurant Brands International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Restaurant Brands is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

Vail Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Restaurant Brands and Vail Resorts

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

The idea behind Restaurant Brands International and Vail Resorts 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.