Correlation Between Red Robin and Papa Johns

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

Diversification Opportunities for Red Robin and Papa Johns

-0.56

Correlation Coefficient

Red Robin  Papa Johns

Excellent diversification

The 3 months correlation between Red and Papa is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Red Robin Gourmet and Papa Johns International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papa Johns International 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 Papa Johns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papa Johns International has no effect on the direction of Red Robin i.e., Red Robin and Papa Johns go up and down completely randomly.

Pair Corralation between Red Robin and Papa Johns

Given the investment horizon of 90 days Red Robin is expected to generate 22.23 times less return on investment than Papa Johns. In addition to that, Red Robin is 1.44 times more volatile than Papa Johns International. It trades about 0.0 of its total potential returns per unit of risk. Papa Johns International is currently generating about 0.09 per unit of volatility. If you would invest  3,993  in Papa Johns International on December 18, 2024 and sell it today you would earn a total of  698.00  from holding Papa Johns International or generate 17.48% 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.  Papa Johns International

Red Robin Gourmet

Risk-Adjusted Performance

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.

Papa Johns International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Papa Johns International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Papa Johns sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Robin and Papa Johns

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

The idea behind Red Robin Gourmet and Papa Johns International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.