Correlation Between FAT Brands and Chuys Holdings

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

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

Diversification Opportunities for FAT Brands and Chuys Holdings

-0.27

Correlation Coefficient

FAT Brands  Chuys Holdings

Very good diversification

The 3 months correlation between FAT and Chuys is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Chuys Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chuys Holdings and FAT Brands 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 FAT Brands are associated (or correlated) with Chuys Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chuys Holdings has no effect on the direction of FAT Brands i.e., FAT Brands and Chuys Holdings go up and down completely randomly.

Pair Corralation between FAT Brands and Chuys Holdings

Assuming the 90 days horizon FAT Brands is expected to under-perform the Chuys Holdings. In addition to that, FAT Brands is 21.75 times more volatile than Chuys Holdings. It trades about -0.01 of its total potential returns per unit of risk. Chuys Holdings is currently generating about 0.36 per unit of volatility. If you would invest  3,736  in Chuys Holdings on September 17, 2024 and sell it today you would earn a total of  12.00  from holding Chuys Holdings or generate 0.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	29.23%
Values	Daily Returns

FAT Brands  vs.  Chuys Holdings

FAT Brands

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days FAT Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, FAT Brands is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Chuys Holdings

Risk-Adjusted Performance

0 of 100

Strong

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

Pair Trading with FAT Brands and Chuys Holdings

The main advantage of trading using opposite FAT Brands and Chuys Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, Chuys Holdings 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 Chuys Holdings will offset losses from the drop in Chuys Holdings' long position.

The idea behind FAT Brands and Chuys Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.