Correlation Between Potbelly and Bt Brands
Can any of the company-specific risk be diversified away by investing in both Potbelly and Bt 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 Potbelly and Bt Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Potbelly Co and Bt Brands, you can compare the effects of market volatilities on Potbelly and Bt 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 Potbelly with a short position of Bt Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Potbelly and Bt Brands.
Diversification Opportunities for Potbelly and Bt Brands
Very good diversification
The 3 months correlation between Potbelly and BTBD is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Potbelly Co and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands and Potbelly 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 Potbelly Co are associated (or correlated) with Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Potbelly i.e., Potbelly and Bt Brands go up and down completely randomly.
Pair Corralation between Potbelly and Bt Brands
Given the investment horizon of 90 days Potbelly Co is expected to under-perform the Bt Brands. But the stock apears to be less risky and, when comparing its historical volatility, Potbelly Co is 1.63 times less risky than Bt Brands. The stock trades about -0.03 of its potential returns per unit of risk. The Bt Brands is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 185.00 in Bt Brands on September 1, 2024 and sell it today you would lose (33.00) from holding Bt Brands or give up 17.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Potbelly Co vs. Bt Brands
Performance |
| Timeline |
| Potbelly |
| Bt Brands |
Potbelly and Bt Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Potbelly and Bt Brands
The main advantage of trading using opposite Potbelly and Bt Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Potbelly position performs unexpectedly, Bt 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 Bt Brands will offset losses from the drop in Bt Brands' long position.| Potbelly vs. FAT Brands | Potbelly vs. BJs Restaurants | Potbelly vs. One Group Hospitality | Potbelly vs. El Pollo Loco |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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