Correlation Between El Pollo and FAT Brands
Can any of the company-specific risk be diversified away by investing in both El Pollo and FAT Brands 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 El Pollo and FAT Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Pollo Loco and FAT Brands, you can compare the effects of market volatilities on El Pollo and FAT Brands 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 El Pollo with a short position of FAT Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Pollo and FAT Brands.
Diversification Opportunities for El Pollo and FAT Brands
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between LOCO and FAT is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding El Pollo Loco and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and El Pollo 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 El Pollo Loco are associated (or correlated) with FAT Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAT Brands has no effect on the direction of El Pollo i.e., El Pollo and FAT Brands go up and down completely randomly.
Pair Corralation between El Pollo and FAT Brands
Given the investment horizon of 90 days El Pollo is expected to generate 1.54 times less return on investment than FAT Brands. But when comparing it to its historical volatility, El Pollo Loco is 2.19 times less risky than FAT Brands. It trades about 0.02 of its potential returns per unit of risk. FAT Brands is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 521.00 in FAT Brands on August 24, 2024 and sell it today you would lose (81.00) from holding FAT Brands or give up 15.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
El Pollo Loco vs. FAT Brands
Performance |
| Timeline |
| El Pollo Loco |
| FAT Brands |
El Pollo and FAT Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with El Pollo and FAT Brands
The main advantage of trading using opposite El Pollo and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Pollo position performs unexpectedly, FAT Brands 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 FAT Brands will offset losses from the drop in FAT Brands' long position.| El Pollo vs. FAT Brands | El Pollo vs. Potbelly Co | El Pollo vs. BJs Restaurants | El Pollo vs. One Group Hospitality |
| 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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