Correlation Between Restaurant Brands and Advent Wireless

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

Diversification Opportunities for Restaurant Brands and Advent Wireless

0.67
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Restaurant Brands and Advent Wireless

Assuming the 90 days trading horizon Restaurant Brands International is expected to generate 0.58 times more return on investment than Advent Wireless. However, Restaurant Brands International is 1.73 times less risky than Advent Wireless. It trades about 0.06 of its potential returns per unit of risk. Advent Wireless is currently generating about 0.0 per unit of risk. If you would invest  7,279  in Restaurant Brands International on December 6, 2023 and sell it today you would earn a total of  3,317  from holding Restaurant Brands International or generate 45.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Restaurant Brands Internationa  vs.  Advent Wireless

 Performance 
       Timeline  
Restaurant Brands 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Restaurant Brands International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Restaurant Brands may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Advent Wireless 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Advent Wireless are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Advent Wireless is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Restaurant Brands and Advent Wireless Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Restaurant Brands and Advent Wireless

The main advantage of trading using opposite Restaurant Brands and Advent Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands position performs unexpectedly, Advent Wireless 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 Advent Wireless will offset losses from the drop in Advent Wireless' long position.
The idea behind Restaurant Brands International and Advent Wireless 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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