Correlation Between Red Robin and Potbelly

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

By analyzing existing cross correlation between Red Robin Gourmet and Potbelly Co, you can compare the effects of market volatilities on Red Robin and Potbelly 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 Red Robin with a short position of Potbelly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Robin and Potbelly.

Diversification Opportunities for Red Robin and Potbelly

-0.52

Correlation Coefficient

Red Robin  Potbelly

Excellent diversification

The 3 months correlation between Red and Potbelly is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Red Robin Gourmet and Potbelly Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potbelly and Red Robin 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 Red Robin Gourmet are associated (or correlated) with Potbelly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potbelly has no effect on the direction of Red Robin i.e., Red Robin and Potbelly go up and down completely randomly.

Pair Corralation between Red Robin and Potbelly

Given the investment horizon of 90 days Red Robin is expected to generate 8.3 times less return on investment than Potbelly. But when comparing it to its historical volatility, Red Robin Gourmet is 1.22 times less risky than Potbelly. It trades about 0.03 of its potential returns per unit of risk. Potbelly Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  921.00  in Potbelly Co on October 23, 2024 and sell it today you would earn a total of  128.00  from holding Potbelly Co or generate 13.9% return on investment over 90 days.

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

Red Robin Gourmet  vs.  Potbelly Co

Red Robin Gourmet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Robin Gourmet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Red Robin is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Potbelly

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Potbelly Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Potbelly sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Robin and Potbelly

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

The idea behind Red Robin Gourmet and Potbelly Co 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.