Correlation Between FAT Brands and Chuys Holdings
Can any of the company-specific risk be diversified away by investing in both FAT Brands and Chuys Holdings 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 Chuys Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAT Brands and Chuys Holdings, you can compare the effects of market volatilities on FAT Brands and Chuys Holdings 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 Chuys Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Chuys Holdings.
Diversification Opportunities for FAT Brands and Chuys Holdings
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between FAT and Chuys is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Chuys Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chuys Holdings 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 Chuys Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chuys Holdings has no effect on the direction of FAT Brands i.e., FAT Brands and Chuys Holdings go up and down completely randomly.
Pair Corralation between FAT Brands and Chuys Holdings
Assuming the 90 days horizon FAT Brands is expected to under-perform the Chuys Holdings. But the preferred stock apears to be less risky and, when comparing its historical volatility, FAT Brands is 2.1 times less risky than Chuys Holdings. The preferred stock trades about -0.06 of its potential returns per unit of risk. The Chuys Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,501 in Chuys Holdings on August 24, 2024 and sell it today you would earn a total of 247.00 from holding Chuys Holdings or generate 7.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 88.0% |
| Values | Daily Returns |
FAT Brands vs. Chuys Holdings
Performance |
| Timeline |
| FAT Brands |
| Chuys Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
FAT Brands and Chuys Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAT Brands and Chuys Holdings
The main advantage of trading using opposite FAT Brands and Chuys Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, Chuys Holdings 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 Chuys Holdings will offset losses from the drop in Chuys Holdings' long position.The idea behind FAT Brands and Chuys Holdings 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.| Chuys Holdings vs. Brinker International | Chuys Holdings vs. Bloomin Brands | Chuys Holdings vs. FAT Brands | Chuys Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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