Correlation Between Rave Restaurant and Barnes Noble

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Can any of the company-specific risk be diversified away by investing in both Rave Restaurant and Barnes Noble 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 Rave Restaurant and Barnes Noble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rave Restaurant Group and Barnes Noble Education, you can compare the effects of market volatilities on Rave Restaurant and Barnes Noble 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 Rave Restaurant with a short position of Barnes Noble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rave Restaurant and Barnes Noble.

Diversification Opportunities for Rave Restaurant and Barnes Noble

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between Rave Restaurant and Barnes is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and Barnes Noble Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Noble Education and Rave Restaurant 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 Rave Restaurant Group are associated (or correlated) with Barnes Noble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnes Noble Education has no effect on the direction of Rave Restaurant i.e., Rave Restaurant and Barnes Noble go up and down completely randomly.

Pair Corralation between Rave Restaurant and Barnes Noble

Given the investment horizon of 90 days Rave Restaurant Group is expected to under-perform the Barnes Noble. In addition to that, Rave Restaurant is 2.34 times more volatile than Barnes Noble Education. It trades about -0.04 of its total potential returns per unit of risk. Barnes Noble Education is currently generating about -0.04 per unit of volatility. If you would invest  264.00  in Barnes Noble Education on August 28, 2022 and sell it today you would lose (10.00)  from holding Barnes Noble Education or give up 3.79% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Rave Restaurant Group  vs.  Barnes Noble Education

 Performance (%) 
       Timeline  
Rave Restaurant Group 
Rave Restaurant Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Rave Restaurant exhibited solid returns over the last few months and may actually be approaching a breakup point.

Rave Restaurant Price Channel

Barnes Noble Education 
Barnes Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Noble Education are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Barnes Noble exhibited solid returns over the last few months and may actually be approaching a breakup point.

Barnes Price Channel

Rave Restaurant and Barnes Noble Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rave Restaurant and Barnes Noble

The main advantage of trading using opposite Rave Restaurant and Barnes Noble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rave Restaurant position performs unexpectedly, Barnes Noble 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 Barnes Noble will offset losses from the drop in Barnes Noble's long position.
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The idea behind Rave Restaurant Group and Barnes Noble Education 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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Check out your portfolio center. 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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