Correlation Between Avery Dennison and FAT Brands

Can any of the company-specific risk be diversified away by investing in both Avery Dennison 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 Avery Dennison and FAT Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avery Dennison Corp and FAT Brands, you can compare the effects of market volatilities on Avery Dennison 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 Avery Dennison with a short position of FAT Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avery Dennison and FAT Brands.

Diversification Opportunities for Avery Dennison and FAT Brands

-0.27

Correlation Coefficient

Avery Dennison  FAT Brands

Very good diversification

The 3 months correlation between Avery and FAT is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Avery Dennison 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 Avery Dennison Corp 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 Avery Dennison i.e., Avery Dennison and FAT Brands go up and down completely randomly.

Pair Corralation between Avery Dennison and FAT Brands

Considering the 90-day investment horizon Avery Dennison Corp is expected to generate 0.19 times more return on investment than FAT Brands. However, Avery Dennison Corp is 5.32 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 -0.14 per unit of risk. If you would invest  16,930  in Avery Dennison Corp on May 6, 2025 and sell it today you would lose (348.00) from holding Avery Dennison Corp or give up 2.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Avery Dennison Corp  vs.  FAT Brands

Avery Dennison Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avery Dennison Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Avery Dennison is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

FAT Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days FAT Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Preferred Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in September 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Avery Dennison and FAT Brands

The main advantage of trading using opposite Avery Dennison and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avery Dennison 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.

The idea behind Avery Dennison Corp and FAT Brands pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.