Correlation Between Ruths Hospitality and Noble Romans

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

By analyzing existing cross correlation between Ruths Hospitality Group and Noble Romans, you can compare the effects of market volatilities on Ruths Hospitality and Noble Romans 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 Ruths Hospitality with a short position of Noble Romans. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruths Hospitality and Noble Romans.

Diversification Opportunities for Ruths Hospitality and Noble Romans

-0.14

Correlation Coefficient

Ruths Hospitality  Noble Romans

Good diversification

The 3 months correlation between Ruths and Noble is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ruths Hospitality Group and Noble Romans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble Romans and Ruths Hospitality 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 Ruths Hospitality Group are associated (or correlated) with Noble Romans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble Romans has no effect on the direction of Ruths Hospitality i.e., Ruths Hospitality and Noble Romans go up and down completely randomly.

Pair Corralation between Ruths Hospitality and Noble Romans

Given the investment horizon of 90 days Ruths Hospitality Group is expected to generate 0.5 times more return on investment than Noble Romans. However, Ruths Hospitality Group is 2.01 times less risky than Noble Romans. It trades about 0.09 of its potential returns per unit of risk. Noble Romans is currently generating about 0.04 per unit of risk. If you would invest  1,692  in Ruths Hospitality Group on October 6, 2024 and sell it today you would earn a total of  457.00  from holding Ruths Hospitality Group or generate 27.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	18.11%
Values	Daily Returns

Ruths Hospitality Group  vs.  Noble Romans

Ruths Hospitality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruths Hospitality Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Ruths Hospitality is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Noble Romans

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noble Romans has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Noble Romans is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ruths Hospitality and Noble Romans

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

The idea behind Ruths Hospitality Group and Noble Romans 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..