Correlation Between Air T and FAT Brands

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

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

Diversification Opportunities for Air T and FAT Brands

0.13

Correlation Coefficient

Air T  FAT Brands

Average diversification

The 3 months correlation between Air and FAT is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Air T Inc and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Air T 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 Air T Inc 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 Air T i.e., Air T and FAT Brands go up and down completely randomly.

Pair Corralation between Air T and FAT Brands

Assuming the 90 days horizon Air T Inc is expected to generate 2.65 times more return on investment than FAT Brands. However, Air T is 2.65 times more volatile 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  1,716  in Air T Inc on September 24, 2024 and sell it today you would lose (6.00) from holding Air T Inc or give up 0.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.98%
Values	Daily Returns

Air T Inc  vs.  FAT Brands

Air T Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air T Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Air T is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

FAT Brands

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FAT Brands are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Air T and FAT Brands

The main advantage of trading using opposite Air T and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air T 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 Air T Inc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.