Correlation Between FAT Brands and Potbelly
Can any of the company-specific risk be diversified away by investing in both FAT Brands and Potbelly 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 Potbelly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAT Brands and Potbelly Co, you can compare the effects of market volatilities on FAT Brands and Potbelly 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 Potbelly. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Potbelly.
Diversification Opportunities for FAT Brands and Potbelly
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FAT and Potbelly is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Potbelly Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potbelly 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 Potbelly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potbelly has no effect on the direction of FAT Brands i.e., FAT Brands and Potbelly go up and down completely randomly.
Pair Corralation between FAT Brands and Potbelly
Assuming the 90 days horizon FAT Brands is expected to under-perform the Potbelly. But the stock apears to be less risky and, when comparing its historical volatility, FAT Brands is 1.62 times less risky than Potbelly. The stock trades about -0.02 of its potential returns per unit of risk. The Potbelly Co is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 785.00 in Potbelly Co on August 28, 2024 and sell it today you would earn a total of 236.00 from holding Potbelly Co or generate 30.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAT Brands vs. Potbelly Co
Performance |
| Timeline |
| FAT Brands |
| Potbelly |
FAT Brands and Potbelly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAT Brands and Potbelly
The main advantage of trading using opposite FAT Brands and Potbelly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, Potbelly 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 Potbelly will offset losses from the drop in Potbelly's long position.| FAT Brands vs. FAT Brands | FAT Brands vs. Brinker International | FAT Brands vs. Jack In The | FAT Brands vs. Potbelly Co |
| Potbelly vs. FAT Brands | Potbelly vs. BJs Restaurants | Potbelly vs. One Group Hospitality | Potbelly vs. El Pollo Loco |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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