Correlation Between Sadot and Arcos Dorados

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

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

Diversification Opportunities for Sadot and Arcos Dorados

-0.39

Correlation Coefficient

Sadot  Arcos Dorados

Very good diversification

The 3 months correlation between Sadot and Arcos is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sadot Group and Arcos Dorados Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcos Dorados Holdings and Sadot 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 Sadot Group are associated (or correlated) with Arcos Dorados. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcos Dorados Holdings has no effect on the direction of Sadot i.e., Sadot and Arcos Dorados go up and down completely randomly.

Pair Corralation between Sadot and Arcos Dorados

Given the investment horizon of 90 days Sadot Group is expected to generate 3.14 times more return on investment than Arcos Dorados. However, Sadot is 3.14 times more volatile than Arcos Dorados Holdings. It trades about 0.04 of its potential returns per unit of risk. Arcos Dorados Holdings is currently generating about -0.01 per unit of risk. If you would invest  390.00  in Sadot Group on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Sadot Group or generate 0.26% return on investment over 90 days.

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

Sadot Group  vs.  Arcos Dorados Holdings

Sadot Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sadot Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Sadot unveiled solid returns over the last few months and may actually be approaching a breakup point.

Arcos Dorados Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sadot and Arcos Dorados

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

The idea behind Sadot Group and Arcos Dorados Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.