Correlation Between FAT Brands and Arcos Dorados
Can any of the company-specific risk be diversified away by investing in both FAT Brands and Arcos Dorados 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 FAT Brands and Arcos Dorados into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAT Brands and Arcos Dorados Holdings, you can compare the effects of market volatilities on FAT Brands and Arcos Dorados 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 FAT Brands with a short position of Arcos Dorados. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Arcos Dorados.
Diversification Opportunities for FAT Brands and Arcos Dorados
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between FAT and Arcos is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Arcos Dorados Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcos Dorados Holdings and FAT 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 FAT Brands are associated (or correlated) with Arcos Dorados. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcos Dorados Holdings has no effect on the direction of FAT Brands i.e., FAT Brands and Arcos Dorados go up and down completely randomly.
Pair Corralation between FAT Brands and Arcos Dorados
Considering the 90-day investment horizon FAT Brands is expected to generate 0.76 times more return on investment than Arcos Dorados. However, FAT Brands is 1.31 times less risky than Arcos Dorados. It trades about 0.1 of its potential returns per unit of risk. Arcos Dorados Holdings is currently generating about -0.05 per unit of risk. If you would invest 538.00 in FAT Brands on October 20, 2024 and sell it today you would earn a total of 11.00 from holding FAT Brands or generate 2.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAT Brands vs. Arcos Dorados Holdings
Performance |
| Timeline |
| FAT Brands |
| Arcos Dorados Holdings |
FAT Brands and Arcos Dorados Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAT Brands and Arcos Dorados
The main advantage of trading using opposite FAT Brands and Arcos Dorados positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, Arcos Dorados 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 Arcos Dorados will offset losses from the drop in Arcos Dorados' long position.| FAT Brands vs. FAT Brands | FAT Brands vs. Cannae Holdings | FAT Brands vs. Nathans Famous | FAT Brands vs. Dine Brands Global |
| Arcos Dorados vs. BJs Restaurants | Arcos Dorados vs. Dine Brands Global | Arcos Dorados vs. Brinker International | Arcos Dorados vs. Bloomin Brands |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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