Correlation Between FAT Brands and Texas Roadhouse
Can any of the company-specific risk be diversified away by investing in both FAT Brands and Texas Roadhouse 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 Texas Roadhouse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAT Brands and Texas Roadhouse, you can compare the effects of market volatilities on FAT Brands and Texas Roadhouse 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 Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Texas Roadhouse.
Diversification Opportunities for FAT Brands and Texas Roadhouse
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between FAT and Texas is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse 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 Texas Roadhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Roadhouse has no effect on the direction of FAT Brands i.e., FAT Brands and Texas Roadhouse go up and down completely randomly.
Pair Corralation between FAT Brands and Texas Roadhouse
Assuming the 90 days horizon FAT Brands is expected to generate 2.65 times more return on investment than Texas Roadhouse. However, FAT Brands is 2.65 times more volatile than Texas Roadhouse. It trades about -0.01 of its potential returns per unit of risk. Texas Roadhouse is currently generating about -0.07 per unit of risk. If you would invest 466.00 in FAT Brands on September 13, 2024 and sell it today you would lose (11.00) from holding FAT Brands or give up 2.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
FAT Brands vs. Texas Roadhouse
Performance |
| Timeline |
| FAT Brands |
| Texas Roadhouse |
FAT Brands and Texas Roadhouse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAT Brands and Texas Roadhouse
The main advantage of trading using opposite FAT Brands and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, Texas Roadhouse 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 Texas Roadhouse will offset losses from the drop in Texas Roadhouse's 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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