Correlation Between Avery Dennison and FAT Brands
Can any of the company-specific risk be diversified away by investing in both Avery Dennison and FAT Brands 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 Avery Dennison and FAT Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avery Dennison Corp and FAT Brands, you can compare the effects of market volatilities on Avery Dennison and FAT Brands 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 Avery Dennison with a short position of FAT Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avery Dennison and FAT Brands.
Diversification Opportunities for Avery Dennison and FAT Brands
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Avery and FAT is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Avery Dennison 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 Avery Dennison Corp are associated (or correlated) with FAT Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAT Brands has no effect on the direction of Avery Dennison i.e., Avery Dennison and FAT Brands go up and down completely randomly.
Pair Corralation between Avery Dennison and FAT Brands
Considering the 90-day investment horizon Avery Dennison Corp is expected to generate 0.72 times more return on investment than FAT Brands. However, Avery Dennison Corp is 1.39 times less risky than FAT Brands. It trades about -0.05 of its potential returns per unit of risk. FAT Brands is currently generating about -0.07 per unit of risk. If you would invest 21,675 in Avery Dennison Corp on November 21, 2024 and sell it today you would lose (3,308) from holding Avery Dennison Corp or give up 15.26% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Avery Dennison Corp vs. FAT Brands
Performance |
Timeline |
Avery Dennison Corp |
FAT Brands |
Avery Dennison and FAT Brands Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Avery Dennison and FAT Brands
The main advantage of trading using opposite Avery Dennison and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avery Dennison position performs unexpectedly, FAT Brands 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 FAT Brands will offset losses from the drop in FAT Brands' long position.Avery Dennison vs. Packaging Corp of | ||
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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