Correlation Between Inspired Entertainment and Ark Restaurants

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

By analyzing existing cross correlation between Inspired Entertainment and Ark Restaurants Corp, you can compare the effects of market volatilities on Inspired Entertainment and Ark Restaurants 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 Inspired Entertainment with a short position of Ark Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspired Entertainment and Ark Restaurants.

Diversification Opportunities for Inspired Entertainment and Ark Restaurants

-0.67

Correlation Coefficient

Inspired Entertainment  Ark Restaurants

Excellent diversification

The 3 months correlation between Inspired and Ark is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Inspired Entertainment and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp and Inspired Entertainment 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 Inspired Entertainment are associated (or correlated) with Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of Inspired Entertainment i.e., Inspired Entertainment and Ark Restaurants go up and down completely randomly.

Pair Corralation between Inspired Entertainment and Ark Restaurants

Given the investment horizon of 90 days Inspired Entertainment is expected to generate 0.96 times more return on investment than Ark Restaurants. However, Inspired Entertainment is 1.04 times less risky than Ark Restaurants. It trades about 0.12 of its potential returns per unit of risk. Ark Restaurants Corp is currently generating about -0.14 per unit of risk. If you would invest  844.00  in Inspired Entertainment on September 4, 2024 and sell it today you would earn a total of  137.00  from holding Inspired Entertainment or generate 16.23% return on investment over 90 days.

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

Inspired Entertainment  vs.  Ark Restaurants Corp

Inspired Entertainment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inspired Entertainment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Inspired Entertainment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ark Restaurants Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ark Restaurants Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Inspired Entertainment and Ark Restaurants

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

The idea behind Inspired Entertainment and Ark Restaurants Corp 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.

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 the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.