Correlation Between Ruths Hospitality and Potbelly

Can any of the company-specific risk be diversified away by investing in both Ruths Hospitality 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 Ruths Hospitality and Potbelly 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 Potbelly Co, you can compare the effects of market volatilities on Ruths Hospitality 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 Ruths Hospitality with a short position of Potbelly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruths Hospitality and Potbelly.

Diversification Opportunities for Ruths Hospitality and Potbelly

0.33

Correlation Coefficient

Ruths Hospitality  Potbelly

Weak diversification

The 3 months correlation between Ruths and Potbelly is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ruths Hospitality Group and Potbelly Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potbelly 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 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 Ruths Hospitality i.e., Ruths Hospitality and Potbelly go up and down completely randomly.

Pair Corralation between Ruths Hospitality and Potbelly

If you would invest  846.00  in Potbelly Co on October 21, 2024 and sell it today you would earn a total of  203.00  from holding Potbelly Co or generate 24.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.61%
Values	Daily Returns

Ruths Hospitality Group  vs.  Potbelly Co

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.

Potbelly

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Potbelly Co are ranked lower than 8 (%) 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 Ruths Hospitality and Potbelly

The main advantage of trading using opposite Ruths Hospitality and Potbelly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ruths Hospitality 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 Ruths Hospitality Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.