Correlation Between Rave Restaurant and Northstar Clean

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

Diversification Opportunities for Rave Restaurant and Northstar Clean

0.33

Correlation Coefficient

Rave Restaurant  Northstar Clean

Weak diversification

The 3 months correlation between Rave and Northstar is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and Northstar Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northstar Clean Tech 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 Northstar Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northstar Clean Tech has no effect on the direction of Rave Restaurant i.e., Rave Restaurant and Northstar Clean go up and down completely randomly.

Pair Corralation between Rave Restaurant and Northstar Clean

Given the investment horizon of 90 days Rave Restaurant is expected to generate 6.0 times less return on investment than Northstar Clean. But when comparing it to its historical volatility, Rave Restaurant Group is 1.24 times less risky than Northstar Clean. It trades about 0.06 of its potential returns per unit of risk. Northstar Clean Technologies is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Northstar Clean Technologies on October 7, 2024 and sell it today you would earn a total of  14.00  from holding Northstar Clean Technologies or generate 93.33% return on investment over 90 days.

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

Rave Restaurant Group  vs.  Northstar Clean Technologies

Rave Restaurant Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rave Restaurant may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Northstar Clean Tech

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northstar Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rave Restaurant and Northstar Clean

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

The idea behind Rave Restaurant Group and Northstar Clean Technologies 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.