Correlation Between XL Fleet and Rave Restaurant

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

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

Diversification Opportunities for XL Fleet and Rave Restaurant

-0.01

Correlation Coefficient

XL Fleet  Rave Restaurant

Good diversification

The 3 months correlation between XL Fleet and Rave is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding XL Fleet Corp and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant Group and XL Fleet 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 XL Fleet Corp are associated (or correlated) with Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of XL Fleet i.e., XL Fleet and Rave Restaurant go up and down completely randomly.

Pair Corralation between XL Fleet and Rave Restaurant

Allowing for the 90-day total investment horizon XL Fleet is expected to generate 3.52 times less return on investment than Rave Restaurant. In addition to that, XL Fleet is 1.47 times more volatile than Rave Restaurant Group. It trades about 0.01 of its total potential returns per unit of risk. Rave Restaurant Group is currently generating about 0.07 per unit of volatility. If you would invest  84.00  in Rave Restaurant Group on January 31, 2024 and sell it today you would earn a total of  123.00  from holding Rave Restaurant Group or generate 146.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	33.2%
Values	Daily Returns

XL Fleet Corp  vs.  Rave Restaurant Group

XL Fleet Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XL Fleet Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, XL Fleet is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Rave Restaurant Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rave Restaurant may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with XL Fleet and Rave Restaurant

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

The idea behind XL Fleet Corp and Rave 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.