Correlation Between Rave Restaurant and Universal

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

Diversification Opportunities for Rave Restaurant and Universal

0.45

Correlation Coefficient

Rave Restaurant  Universal

Very weak diversification

The 3 months correlation between Rave and Universal is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Rave Restaurant i.e., Rave Restaurant and Universal go up and down completely randomly.

Pair Corralation between Rave Restaurant and Universal

Given the investment horizon of 90 days Rave Restaurant Group is expected to generate 2.05 times more return on investment than Universal. However, Rave Restaurant is 2.05 times more volatile than Universal. It trades about 0.05 of its potential returns per unit of risk. Universal is currently generating about 0.02 per unit of risk. If you would invest  163.00  in Rave Restaurant Group on October 11, 2024 and sell it today you would earn a total of  96.00  from holding Rave Restaurant Group or generate 58.9% return on investment over 90 days.

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

Rave Restaurant Group  vs.  Universal

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.

Universal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Rave Restaurant and Universal

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

The idea behind Rave Restaurant Group and Universal 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 CEOs Directory module to screen CEOs from public companies around the world.