Correlation Between Restaurant Brands and Autocanada

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

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

Diversification Opportunities for Restaurant Brands and Autocanada

0.42

Correlation Coefficient

Restaurant Brands  Autocanada

Very weak diversification

The 3 months correlation between Restaurant and Autocanada is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Autocanada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autocanada and Restaurant Brands 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 Restaurant Brands International are associated (or correlated) with Autocanada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autocanada has no effect on the direction of Restaurant Brands i.e., Restaurant Brands and Autocanada go up and down completely randomly.

Pair Corralation between Restaurant Brands and Autocanada

Assuming the 90 days trading horizon Restaurant Brands International is expected to generate 0.87 times more return on investment than Autocanada. However, Restaurant Brands International is 1.15 times less risky than Autocanada. It trades about 0.05 of its potential returns per unit of risk. Autocanada is currently generating about -0.1 per unit of risk. If you would invest  9,628  in Restaurant Brands International on September 15, 2024 and sell it today you would earn a total of  92.00  from holding Restaurant Brands International or generate 0.96% return on investment over 90 days.

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

Restaurant Brands Internationa  vs.  Autocanada

Restaurant Brands

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Restaurant Brands International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Restaurant Brands is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Autocanada

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Restaurant Brands and Autocanada

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

The idea behind Restaurant Brands International and Autocanada 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.