Correlation Between FAT Brands and Noodles
Can any of the company-specific risk be diversified away by investing in both FAT Brands and Noodles 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 Noodles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAT Brands and Noodles Company, you can compare the effects of market volatilities on FAT Brands and Noodles 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 Noodles. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Noodles.
Diversification Opportunities for FAT Brands and Noodles
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between FAT and Noodles is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Noodles Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noodles Company 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 Noodles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noodles Company has no effect on the direction of FAT Brands i.e., FAT Brands and Noodles go up and down completely randomly.
Pair Corralation between FAT Brands and Noodles
Assuming the 90 days horizon FAT Brands is expected to generate 1.09 times more return on investment than Noodles. However, FAT Brands is 1.09 times more volatile than Noodles Company. It trades about 0.02 of its potential returns per unit of risk. Noodles Company is currently generating about -0.07 per unit of risk. If you would invest 523.00 in FAT Brands on August 29, 2024 and sell it today you would lose (61.00) from holding FAT Brands or give up 11.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAT Brands vs. Noodles Company
Performance |
| Timeline |
| FAT Brands |
| Noodles Company |
FAT Brands and Noodles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAT Brands and Noodles
The main advantage of trading using opposite FAT Brands and Noodles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, Noodles 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 Noodles will offset losses from the drop in Noodles' long position.| FAT Brands vs. FAT Brands | FAT Brands vs. Brinker International | FAT Brands vs. Jack In The | FAT Brands vs. Potbelly Co |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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