Correlation Between Good Times and Marstons PLC

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

Diversification Opportunities for Good Times and Marstons PLC

0.4

Correlation Coefficient

Good Times  Marstons PLC

Very weak diversification

The 3 months correlation between Good and Marstons is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and Marstons PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marstons PLC 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 Marstons PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marstons PLC has no effect on the direction of Good Times i.e., Good Times and Marstons PLC go up and down completely randomly.

Pair Corralation between Good Times and Marstons PLC

Given the investment horizon of 90 days Good Times Restaurants is expected to generate 2.2 times more return on investment than Marstons PLC. However, Good Times is 2.2 times more volatile than Marstons PLC. It trades about -0.03 of its potential returns per unit of risk. Marstons PLC is currently generating about -0.15 per unit of risk. If you would invest  286.00  in Good Times Restaurants on September 12, 2024 and sell it today you would lose (17.00) from holding Good Times Restaurants or give up 5.94% of portfolio value over 90 days.

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

Good Times Restaurants  vs.  Marstons PLC

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 latest stock price disarray, may contribute to short-term losses for the investors.

Marstons PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marstons PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Good Times and Marstons PLC

The main advantage of trading using opposite Good Times and Marstons PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Good Times position performs unexpectedly, Marstons PLC 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 Marstons PLC will offset losses from the drop in Marstons PLC's long position.

The idea behind Good Times Restaurants and Marstons PLC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.