Correlation Between El Pollo and Nextracker

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

By analyzing existing cross correlation between El Pollo Loco and Nextracker Class A, you can compare the effects of market volatilities on El Pollo and Nextracker 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 El Pollo with a short position of Nextracker. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Pollo and Nextracker.

Diversification Opportunities for El Pollo and Nextracker

0.71

Correlation Coefficient

El Pollo  Nextracker

Poor diversification

The 3 months correlation between LOCO and Nextracker is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding El Pollo Loco and Nextracker Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextracker Class A and El Pollo 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 El Pollo Loco are associated (or correlated) with Nextracker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextracker Class A has no effect on the direction of El Pollo i.e., El Pollo and Nextracker go up and down completely randomly.

Pair Corralation between El Pollo and Nextracker

Given the investment horizon of 90 days El Pollo is expected to generate 1.81 times less return on investment than Nextracker. But when comparing it to its historical volatility, El Pollo Loco is 1.47 times less risky than Nextracker. It trades about 0.11 of its potential returns per unit of risk. Nextracker Class A is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,289  in Nextracker Class A on May 6, 2025 and sell it today you would earn a total of  1,326  from holding Nextracker Class A or generate 30.93% return on investment over 90 days.

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

El Pollo Loco  vs.  Nextracker Class A

El Pollo Loco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in El Pollo Loco are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, El Pollo displayed solid returns over the last few months and may actually be approaching a breakup point.

Nextracker Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextracker Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Nextracker unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with El Pollo and Nextracker

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

The idea behind El Pollo Loco and Nextracker Class A 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.