Correlation Between Good Times and Bt Brands

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

Diversification Opportunities for Good Times and Bt Brands

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Good and BTBD is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands and Good Times 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 Good Times Restaurants are associated (or correlated) with Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Good Times i.e., Good Times and Bt Brands go up and down completely randomly.

Pair Corralation between Good Times and Bt Brands

Given the investment horizon of 90 days Good Times Restaurants is expected to under-perform the Bt Brands. But the stock apears to be less risky and, when comparing its historical volatility, Good Times Restaurants is 1.67 times less risky than Bt Brands. The stock trades about -0.05 of its potential returns per unit of risk. The Bt Brands is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  163.00  in Bt Brands on September 15, 2024 and sell it today you would lose (3.00) from holding Bt Brands or give up 1.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Good Times Restaurants  vs.  Bt Brands

 Performance 
       Timeline  
Good Times Restaurants 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Bt Brands 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Bt Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Bt Brands is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Good Times and Bt Brands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Good Times and Bt Brands

The main advantage of trading using opposite Good Times and Bt Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Good Times position performs unexpectedly, Bt Brands 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 Bt Brands will offset losses from the drop in Bt Brands' long position.
The idea behind Good Times Restaurants and Bt Brands 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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