Correlation Between FAT Brands and One Group
Can any of the company-specific risk be diversified away by investing in both FAT Brands and One Group 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 One Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAT Brands and One Group Hospitality, you can compare the effects of market volatilities on FAT Brands and One Group 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 One Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and One Group.
Diversification Opportunities for FAT Brands and One Group
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between FAT and One is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and One Group Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Group Hospitality 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 One Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Group Hospitality has no effect on the direction of FAT Brands i.e., FAT Brands and One Group go up and down completely randomly.
Pair Corralation between FAT Brands and One Group
Assuming the 90 days horizon FAT Brands is expected to under-perform the One Group. But the stock apears to be less risky and, when comparing its historical volatility, FAT Brands is 1.57 times less risky than One Group. The stock trades about -0.02 of its potential returns per unit of risk. The One Group Hospitality is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 352.00 in One Group Hospitality on August 28, 2024 and sell it today you would earn a total of 1.00 from holding One Group Hospitality or generate 0.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAT Brands vs. One Group Hospitality
Performance |
| Timeline |
| FAT Brands |
| One Group Hospitality |
FAT Brands and One Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAT Brands and One Group
The main advantage of trading using opposite FAT Brands and One Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, One Group 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 One Group will offset losses from the drop in One Group's long position.| FAT Brands vs. FAT Brands | FAT Brands vs. Brinker International | FAT Brands vs. Jack In The | FAT Brands vs. Potbelly Co |
| One Group vs. FAT Brands | One Group vs. Potbelly Co | One Group vs. BJs Restaurants | One Group vs. Rave Restaurant Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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