Correlation Between FAT Brands and Franchise
Can any of the company-specific risk be diversified away by investing in both FAT Brands and Franchise 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 Franchise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAT Brands and Franchise Group, you can compare the effects of market volatilities on FAT Brands and Franchise 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 Franchise. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Franchise.
Diversification Opportunities for FAT Brands and Franchise
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between FAT and Franchise is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Franchise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franchise Group 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 Franchise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franchise Group has no effect on the direction of FAT Brands i.e., FAT Brands and Franchise go up and down completely randomly.
Pair Corralation between FAT Brands and Franchise
If you would invest 2,493 in Franchise Group on August 31, 2024 and sell it today you would earn a total of 0.00 from holding Franchise Group or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 0.4% |
| Values | Daily Returns |
FAT Brands vs. Franchise Group
Performance |
| Timeline |
| FAT Brands |
| Franchise Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
FAT Brands and Franchise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAT Brands and Franchise
The main advantage of trading using opposite FAT Brands and Franchise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, Franchise 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 Franchise will offset losses from the drop in Franchise's long position.The idea behind FAT Brands and Franchise Group 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.| Franchise vs. Pure Cycle | Franchise vs. Sphere Entertainment Co | Franchise vs. Transportadora de Gas | Franchise vs. Southwest Gas Holdings |
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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