Correlation Between Smurfit WestRock and FAT Brands
Can any of the company-specific risk be diversified away by investing in both Smurfit WestRock 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 Smurfit WestRock and FAT Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smurfit WestRock plc and FAT Brands, you can compare the effects of market volatilities on Smurfit WestRock 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 Smurfit WestRock with a short position of FAT Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smurfit WestRock and FAT Brands.
Diversification Opportunities for Smurfit WestRock and FAT Brands
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Smurfit and FAT is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit WestRock plc and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Smurfit WestRock 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 Smurfit WestRock plc 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 Smurfit WestRock i.e., Smurfit WestRock and FAT Brands go up and down completely randomly.
Pair Corralation between Smurfit WestRock and FAT Brands
Allowing for the 90-day total investment horizon Smurfit WestRock plc is expected to generate 3.07 times more return on investment than FAT Brands. However, Smurfit WestRock is 3.07 times more volatile than FAT Brands. It trades about 0.34 of its potential returns per unit of risk. FAT Brands is currently generating about 0.11 per unit of risk. If you would invest 4,502 in Smurfit WestRock plc on August 28, 2024 and sell it today you would earn a total of 1,123 from holding Smurfit WestRock plc or generate 24.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smurfit WestRock plc vs. FAT Brands
Performance |
| Timeline |
| Smurfit WestRock plc |
| FAT Brands |
Smurfit WestRock and FAT Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smurfit WestRock and FAT Brands
The main advantage of trading using opposite Smurfit WestRock and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smurfit WestRock 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.| Smurfit WestRock vs. JBG SMITH Properties | Smurfit WestRock vs. Nike Inc | Smurfit WestRock vs. Skechers USA | Smurfit WestRock vs. Toro Co |
| FAT Brands vs. Fortress Biotech Pref | FAT Brands vs. FAT Brands | FAT Brands vs. Aquagold International | FAT Brands vs. Morningstar Unconstrained Allocation |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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