Correlation Between PlayAGS and Rave Restaurant

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

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

Diversification Opportunities for PlayAGS and Rave Restaurant

0.96

Correlation Coefficient

PlayAGS  Rave Restaurant

Almost no diversification

The 3 months correlation between PlayAGS and Rave is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding PlayAGS 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 PlayAGS 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 PlayAGS 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 PlayAGS i.e., PlayAGS and Rave Restaurant go up and down completely randomly.

Pair Corralation between PlayAGS and Rave Restaurant

Considering the 90-day investment horizon PlayAGS is expected to generate 21.76 times less return on investment than Rave Restaurant. But when comparing it to its historical volatility, PlayAGS is 18.93 times less risky than Rave Restaurant. It trades about 0.19 of its potential returns per unit of risk. Rave Restaurant Group is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  176.00  in Rave Restaurant Group on September 3, 2024 and sell it today you would earn a total of  125.00  from holding Rave Restaurant Group or generate 71.02% return on investment over 90 days.

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

PlayAGS  vs.  Rave Restaurant Group

PlayAGS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PlayAGS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, PlayAGS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Rave Restaurant Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rave Restaurant exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PlayAGS and Rave Restaurant

The main advantage of trading using opposite PlayAGS and Rave Restaurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PlayAGS 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 PlayAGS 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.