Correlation Between Potbelly and Noodles
Can any of the company-specific risk be diversified away by investing in both Potbelly and Noodles 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 Noodles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Potbelly Co and Noodles Company, you can compare the effects of market volatilities on Potbelly and Noodles 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 Noodles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Potbelly and Noodles.
Diversification Opportunities for Potbelly and Noodles
Pay attention - limited upside
The 3 months correlation between Potbelly and Noodles is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Potbelly Co and Noodles Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noodles Company 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 Noodles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noodles Company has no effect on the direction of Potbelly i.e., Potbelly and Noodles go up and down completely randomly.
Pair Corralation between Potbelly and Noodles
Given the investment horizon of 90 days Potbelly Co is expected to generate 0.7 times more return on investment than Noodles. However, Potbelly Co is 1.42 times less risky than Noodles. It trades about 0.06 of its potential returns per unit of risk. Noodles Company is currently generating about -0.07 per unit of risk. If you would invest 551.00 in Potbelly Co on August 29, 2024 and sell it today you would earn a total of 457.00 from holding Potbelly Co or generate 82.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Potbelly Co vs. Noodles Company
Performance |
| Timeline |
| Potbelly |
| Noodles Company |
Potbelly and Noodles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Potbelly and Noodles
The main advantage of trading using opposite Potbelly and Noodles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Potbelly position performs unexpectedly, Noodles 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 Noodles will offset losses from the drop in Noodles' long position.| Potbelly vs. FAT Brands | Potbelly vs. BJs Restaurants | Potbelly vs. One Group Hospitality | Potbelly vs. El Pollo Loco |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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