Correlation Between Rave Restaurant and Jollibee Foods

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

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

Diversification Opportunities for Rave Restaurant and Jollibee Foods

0.15

Correlation Coefficient

Rave Restaurant  Jollibee Foods

Average diversification

The 3 months correlation between Rave and Jollibee is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and Jollibee Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jollibee Foods and Rave Restaurant 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 Rave Restaurant Group are associated (or correlated) with Jollibee Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jollibee Foods has no effect on the direction of Rave Restaurant i.e., Rave Restaurant and Jollibee Foods go up and down completely randomly.

Pair Corralation between Rave Restaurant and Jollibee Foods

Given the investment horizon of 90 days Rave Restaurant Group is expected to under-perform the Jollibee Foods. But the stock apears to be less risky and, when comparing its historical volatility, Rave Restaurant Group is 1.56 times less risky than Jollibee Foods. The stock trades about -0.08 of its potential returns per unit of risk. The Jollibee Foods is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  449.00  in Jollibee Foods on October 21, 2024 and sell it today you would lose (29.00) from holding Jollibee Foods or give up 6.46% of portfolio value over 90 days.

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

Rave Restaurant Group  vs.  Jollibee Foods

Rave Restaurant Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rave Restaurant Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Rave Restaurant is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Jollibee Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Rave Restaurant and Jollibee Foods

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

The idea behind Rave Restaurant Group and Jollibee Foods 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.