Correlation Between Visa and Red Robin

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

By analyzing existing cross correlation between Visa Class A and Red Robin Gourmet, you can compare the effects of market volatilities on Visa and Red Robin 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 Visa with a short position of Red Robin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Red Robin.

Diversification Opportunities for Visa and Red Robin

-0.67

Correlation Coefficient

Visa  Red Robin

Excellent diversification

The 3 months correlation between Visa and Red is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Red Robin Gourmet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Robin Gourmet and Visa 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 Visa Class A are associated (or correlated) with Red Robin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Robin Gourmet has no effect on the direction of Visa i.e., Visa and Red Robin go up and down completely randomly.

Pair Corralation between Visa and Red Robin

Taking into account the 90-day investment horizon Visa is expected to generate 5.61 times less return on investment than Red Robin. But when comparing it to its historical volatility, Visa Class A is 3.6 times less risky than Red Robin. It trades about 0.05 of its potential returns per unit of risk. Red Robin Gourmet is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  551.00  in Red Robin Gourmet on October 24, 2024 and sell it today you would earn a total of  21.00  from holding Red Robin Gourmet or generate 3.81% return on investment over 90 days.

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

Visa Class A  vs.  Red Robin Gourmet

Visa Class A

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Red Robin Gourmet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Robin Gourmet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Red Robin is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Red Robin

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

The idea behind Visa Class A and Red Robin Gourmet 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.