Correlation Between Expedia and FAT Brands
Can any of the company-specific risk be diversified away by investing in both Expedia 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 Expedia and FAT Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Expedia Group and FAT Brands, you can compare the effects of market volatilities on Expedia 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 Expedia with a short position of FAT Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expedia and FAT Brands.
Diversification Opportunities for Expedia and FAT Brands
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Expedia and FAT is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Expedia 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 Expedia Group 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 Expedia i.e., Expedia and FAT Brands go up and down completely randomly.
Pair Corralation between Expedia and FAT Brands
Given the investment horizon of 90 days Expedia Group is expected to generate 1.38 times more return on investment than FAT Brands. However, Expedia is 1.38 times more volatile than FAT Brands. It trades about 0.36 of its potential returns per unit of risk. FAT Brands is currently generating about 0.16 per unit of risk. If you would invest 16,115 in Expedia Group on August 31, 2024 and sell it today you would earn a total of 2,377 from holding Expedia Group or generate 14.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Expedia Group vs. FAT Brands
Performance |
| Timeline |
| Expedia Group |
| FAT Brands |
Expedia and FAT Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Expedia and FAT Brands
The main advantage of trading using opposite Expedia and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expedia 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.| Expedia vs. Airbnb Inc | Expedia vs. TripAdvisor | Expedia vs. Royal Caribbean Cruises | Expedia vs. Norwegian Cruise Line |
| FAT Brands vs. FAT Brands | FAT Brands vs. Cannae Holdings | FAT Brands vs. Nathans Famous | FAT Brands vs. Dine Brands Global |
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..
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