Correlation Between Rave Restaurant and Stepstone

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

Diversification Opportunities for Rave Restaurant and Stepstone

-0.64

Correlation Coefficient

Rave Restaurant  Stepstone

Excellent diversification

The 3 months correlation between Rave and Stepstone is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group 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 Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Rave Restaurant i.e., Rave Restaurant and Stepstone go up and down completely randomly.

Pair Corralation between Rave Restaurant and Stepstone

Given the investment horizon of 90 days Rave Restaurant Group is expected to generate 1.35 times more return on investment than Stepstone. However, Rave Restaurant is 1.35 times more volatile than Stepstone Group. It trades about 0.05 of its potential returns per unit of risk. Stepstone Group is currently generating about -0.02 per unit of risk. If you would invest  264.00  in Rave Restaurant Group on December 26, 2024 and sell it today you would earn a total of  18.00  from holding Rave Restaurant Group or generate 6.82% return on investment over 90 days.

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

Rave Restaurant Group  vs.  Stepstone Group

Rave Restaurant Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 3 (%) 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 April 2025.

Stepstone Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stepstone Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Rave Restaurant and Stepstone

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

The idea behind Rave Restaurant Group and Stepstone 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..