Correlation Between Rave Restaurant and Dada Nexus

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Can any of the company-specific risk be diversified away by investing in both Rave Restaurant and Dada Nexus 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 Dada Nexus 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 Dada Nexus, you can compare the effects of market volatilities on Rave Restaurant and Dada Nexus 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 Dada Nexus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rave Restaurant and Dada Nexus.

Diversification Opportunities for Rave Restaurant and Dada Nexus

-0.76
  Correlation Coefficient

Pay attention - limited upside

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

Pair Corralation between Rave Restaurant and Dada Nexus

Given the investment horizon of 90 days Rave Restaurant Group is expected to generate 0.79 times more return on investment than Dada Nexus. However, Rave Restaurant Group is 1.27 times less risky than Dada Nexus. It trades about 0.12 of its potential returns per unit of risk. Dada Nexus is currently generating about -0.02 per unit of risk. If you would invest  122.00  in Rave Restaurant Group on August 30, 2022 and sell it today you would earn a total of  42.00  from holding Rave Restaurant Group or generate 34.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Rave Restaurant Group  vs.  Dada Nexus Ltd

 Performance (%) 
       Timeline  
Rave Restaurant Group 
Rave Restaurant Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Rave Restaurant exhibited solid returns over the last few months and may actually be approaching a breakup point.

Rave Restaurant Price Channel

Dada Nexus 
Dada Nexus Performance
0 of 100
Over the last 90 days Dada Nexus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dada Nexus Price Channel

Rave Restaurant and Dada Nexus Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rave Restaurant and Dada Nexus

The main advantage of trading using opposite Rave Restaurant and Dada Nexus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rave Restaurant position performs unexpectedly, Dada Nexus 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 Dada Nexus will offset losses from the drop in Dada Nexus' long position.
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The idea behind Rave Restaurant Group and Dada Nexus 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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