Correlation Between Universal and Rave Restaurant

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

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

Diversification Opportunities for Universal and Rave Restaurant

0.45

Correlation Coefficient

Universal  Rave Restaurant

Very weak diversification

The 3 months correlation between Universal and Rave is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Universal and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant Group and Universal 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 Universal are associated (or correlated) with Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of Universal i.e., Universal and Rave Restaurant go up and down completely randomly.

Pair Corralation between Universal and Rave Restaurant

Considering the 90-day investment horizon Universal is expected to generate 5.79 times less return on investment than Rave Restaurant. But when comparing it to its historical volatility, Universal is 2.05 times less risky than Rave Restaurant. It trades about 0.02 of its potential returns per unit of risk. Rave Restaurant Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  163.00  in Rave Restaurant Group on October 11, 2024 and sell it today you would earn a total of  96.00  from holding Rave Restaurant Group or generate 58.9% return on investment over 90 days.

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

Universal  vs.  Rave Restaurant Group

Universal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Rave Restaurant Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rave Restaurant may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Universal and Rave Restaurant

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

The idea behind Universal and Rave Restaurant Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.