Correlation Between Rave Restaurant and FAT Brands
Can any of the company-specific risk be diversified away by investing in both Rave Restaurant 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 Rave Restaurant and FAT Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rave Restaurant Group and FAT Brands, you can compare the effects of market volatilities on Rave Restaurant 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 Rave Restaurant with a short position of FAT Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rave Restaurant and FAT Brands.
Diversification Opportunities for Rave Restaurant and FAT Brands
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rave and FAT is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Rave Restaurant 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 Rave Restaurant Group 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 Rave Restaurant i.e., Rave Restaurant and FAT Brands go up and down completely randomly.
Pair Corralation between Rave Restaurant and FAT Brands
Given the investment horizon of 90 days Rave Restaurant Group is expected to generate 0.89 times more return on investment than FAT Brands. However, Rave Restaurant Group is 1.12 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 per unit of risk. If you would invest 280.00 in Rave Restaurant Group on August 28, 2024 and sell it today you would earn a total of 1.00 from holding Rave Restaurant Group or generate 0.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Rave Restaurant Group vs. FAT Brands
Performance |
| Timeline |
| Rave Restaurant Group |
| FAT Brands |
Rave Restaurant and FAT Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rave Restaurant and FAT Brands
The main advantage of trading using opposite Rave Restaurant and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rave Restaurant 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.| Rave Restaurant vs. Ark Restaurants Corp | Rave Restaurant vs. One Group Hospitality | Rave Restaurant vs. Flanigans Enterprises | Rave Restaurant vs. Noble Romans |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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