Correlation Between Speciality Restaurants and State Trading

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

By analyzing existing cross correlation between Speciality Restaurants Limited and The State Trading, you can compare the effects of market volatilities on Speciality Restaurants and State Trading 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 Speciality Restaurants with a short position of State Trading. Check out your portfolio center. Please also check ongoing floating volatility patterns of Speciality Restaurants and State Trading.

Diversification Opportunities for Speciality Restaurants and State Trading

0.76

Correlation Coefficient

Speciality Restaurants  State Trading

Poor diversification

The 3 months correlation between Speciality and State is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Speciality Restaurants Limited and The State Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Trading and Speciality Restaurants 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 Speciality Restaurants Limited are associated (or correlated) with State Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Trading has no effect on the direction of Speciality Restaurants i.e., Speciality Restaurants and State Trading go up and down completely randomly.

Pair Corralation between Speciality Restaurants and State Trading

Assuming the 90 days trading horizon Speciality Restaurants Limited is expected to generate 0.81 times more return on investment than State Trading. However, Speciality Restaurants Limited is 1.24 times less risky than State Trading. It trades about -0.08 of its potential returns per unit of risk. The State Trading is currently generating about -0.15 per unit of risk. If you would invest  15,257  in Speciality Restaurants Limited on November 29, 2024 and sell it today you would lose (1,863) from holding Speciality Restaurants Limited or give up 12.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Speciality Restaurants Limited  vs.  The State Trading

Speciality Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

State Trading

Risk-Adjusted Performance

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Speciality Restaurants and State Trading

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

The idea behind Speciality Restaurants Limited and The State Trading 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.