Correlation Between FAT Brands and CareCloud
Can any of the company-specific risk be diversified away by investing in both FAT Brands and CareCloud 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 CareCloud into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAT Brands and CareCloud, you can compare the effects of market volatilities on FAT Brands and CareCloud 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 CareCloud. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and CareCloud.
Diversification Opportunities for FAT Brands and CareCloud
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FAT and CareCloud is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and CareCloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareCloud 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 CareCloud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareCloud has no effect on the direction of FAT Brands i.e., FAT Brands and CareCloud go up and down completely randomly.
Pair Corralation between FAT Brands and CareCloud
Assuming the 90 days horizon FAT Brands is expected to generate 5.24 times less return on investment than CareCloud. But when comparing it to its historical volatility, FAT Brands is 6.88 times less risky than CareCloud. It trades about 0.29 of its potential returns per unit of risk. CareCloud is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,220 in CareCloud on August 31, 2024 and sell it today you would earn a total of 414.00 from holding CareCloud or generate 33.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAT Brands vs. CareCloud
Performance |
| Timeline |
| FAT Brands |
| CareCloud |
FAT Brands and CareCloud Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAT Brands and CareCloud
The main advantage of trading using opposite FAT Brands and CareCloud positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, CareCloud 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 CareCloud will offset losses from the drop in CareCloud's long position.The idea behind FAT Brands and CareCloud pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| CareCloud vs. Evolent Health | CareCloud vs. Simulations Plus | CareCloud vs. Privia Health Group | CareCloud vs. HealthStream |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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