Correlation Between Regional Container and MK Restaurant

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

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

Diversification Opportunities for Regional Container and MK Restaurant

-0.49

Correlation Coefficient

Regional Container  MK Restaurant

Very good diversification

The 3 months correlation between Regional and MK Restaurant is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines and MK Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MK Restaurant Group and Regional Container 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 Regional Container Lines are associated (or correlated) with MK Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MK Restaurant Group has no effect on the direction of Regional Container i.e., Regional Container and MK Restaurant go up and down completely randomly.

Pair Corralation between Regional Container and MK Restaurant

Assuming the 90 days trading horizon Regional Container Lines is expected to generate 80.69 times more return on investment than MK Restaurant. However, Regional Container is 80.69 times more volatile than MK Restaurant Group. It trades about 0.12 of its potential returns per unit of risk. MK Restaurant Group is currently generating about -0.18 per unit of risk. If you would invest  2,408  in Regional Container Lines on September 29, 2024 and sell it today you would earn a total of  392.00  from holding Regional Container Lines or generate 16.28% return on investment over 90 days.

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

Regional Container Lines  vs.  MK Restaurant Group

Regional Container Lines

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Regional Container sustained solid returns over the last few months and may actually be approaching a breakup point.

MK Restaurant Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MK Restaurant Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Regional Container and MK Restaurant

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

The idea behind Regional Container Lines and MK Restaurant Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..