Correlation Between Flanigans Enterprises and FAT Brands

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

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

Diversification Opportunities for Flanigans Enterprises and FAT Brands

-0.31

Correlation Coefficient

Flanigans Enterprises  FAT Brands

Very good diversification

The 3 months correlation between Flanigans and FAT is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Flanigans Enterprises and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Flanigans Enterprises 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 Flanigans Enterprises 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 Flanigans Enterprises i.e., Flanigans Enterprises and FAT Brands go up and down completely randomly.

Pair Corralation between Flanigans Enterprises and FAT Brands

Considering the 90-day investment horizon Flanigans Enterprises is expected to generate 26.17 times more return on investment than FAT Brands. However, Flanigans Enterprises is 26.17 times more volatile than FAT Brands. It trades about 0.04 of its potential returns per unit of risk. FAT Brands is currently generating about -0.01 per unit of risk. If you would invest  2,569  in Flanigans Enterprises on October 4, 2024 and sell it today you would lose (44.00) from holding Flanigans Enterprises or give up 1.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.56%
Values	Daily Returns

Flanigans Enterprises  vs.  FAT Brands

Flanigans Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flanigans Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Flanigans Enterprises is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

FAT Brands

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FAT Brands are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, FAT Brands may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Flanigans Enterprises and FAT Brands

The main advantage of trading using opposite Flanigans Enterprises and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flanigans Enterprises 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 Flanigans Enterprises 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 Transaction History module to view history of all your transactions and understand their impact on performance.