Correlation Between Good Times and BT Brands

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 Warrant, 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

0.13

Correlation Coefficient

Good Times  BT Brands

Average diversification

The 3 months correlation between Good and BTBDW is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and BT Brands Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BT Brands Warrant 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 Warrant 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 7.56 times less risky than BT Brands. The stock trades about -0.02 of its potential returns per unit of risk. The BT Brands Warrant is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9.45  in BT Brands Warrant on September 12, 2024 and sell it today you would lose (0.06) from holding BT Brands Warrant or give up 0.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	25.0%
Values	Daily Returns

Good Times Restaurants  vs.  BT Brands Warrant

Good Times Restaurants

Risk-Adjusted Performance

0 of 100

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 very healthy forward indicators, Good Times is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BT Brands Warrant

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days BT Brands Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unfluctuating fundamental indicators, BT Brands showed solid returns over the last few months and may actually be approaching a breakup point.

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 Warrant 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.