Correlation Between Rave Restaurant and NISOURCE

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

Diversification Opportunities for Rave Restaurant and NISOURCE

-0.04

Correlation Coefficient

Rave Restaurant  NISOURCE

Good diversification

The 3 months correlation between Rave and NISOURCE is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and NISOURCE FIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISOURCE FIN P 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 NISOURCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISOURCE FIN P has no effect on the direction of Rave Restaurant i.e., Rave Restaurant and NISOURCE go up and down completely randomly.

Pair Corralation between Rave Restaurant and NISOURCE

Given the investment horizon of 90 days Rave Restaurant Group is expected to under-perform the NISOURCE. But the stock apears to be less risky and, when comparing its historical volatility, Rave Restaurant Group is 1.03 times less risky than NISOURCE. The stock trades about -0.34 of its potential returns per unit of risk. The NISOURCE FIN P is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9,782  in NISOURCE FIN P on October 8, 2024 and sell it today you would earn a total of  193.00  from holding NISOURCE FIN P or generate 1.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.42%
Values	Daily Returns

Rave Restaurant Group  vs.  NISOURCE FIN P

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 fragile basic indicators, Rave Restaurant may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NISOURCE FIN P

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NISOURCE FIN P are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NISOURCE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rave Restaurant and NISOURCE

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

The idea behind Rave Restaurant Group and NISOURCE FIN P 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.