Correlation Between Packaging Corp and FAT Brands

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

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

Diversification Opportunities for Packaging Corp and FAT Brands

-0.56

Correlation Coefficient

Packaging Corp  FAT Brands

Excellent diversification

The 3 months correlation between Packaging and FAT is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Packaging Corp of and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Packaging Corp 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 Packaging Corp of 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 Packaging Corp i.e., Packaging Corp and FAT Brands go up and down completely randomly.

Pair Corralation between Packaging Corp and FAT Brands

Considering the 90-day investment horizon Packaging Corp of is expected to generate 0.2 times more return on investment than FAT Brands. However, Packaging Corp of is 4.98 times less risky than FAT Brands. It trades about 0.09 of its potential returns per unit of risk. FAT Brands is currently generating about -0.15 per unit of risk. If you would invest  17,884  in Packaging Corp of on May 7, 2025 and sell it today you would earn a total of  1,424  from holding Packaging Corp of or generate 7.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Packaging Corp of  vs.  FAT Brands

Packaging Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging Corp of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady forward-looking signals, Packaging Corp may actually be approaching a critical reversion point that can send shares even higher in September 2025.

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 Packaging Corp and FAT Brands

The main advantage of trading using opposite Packaging Corp and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packaging Corp 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 Packaging Corp of 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.