Correlation Between FAT Brands and Chanson International

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

By analyzing existing cross correlation between FAT Brands and Chanson International Holding, you can compare the effects of market volatilities on FAT Brands and Chanson International 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 Chanson International. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Chanson International.

Diversification Opportunities for FAT Brands and Chanson International

-0.61

Correlation Coefficient

FAT Brands  Chanson International

Excellent diversification

The 3 months correlation between FAT and Chanson is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Chanson International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chanson International 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 Chanson International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chanson International has no effect on the direction of FAT Brands i.e., FAT Brands and Chanson International go up and down completely randomly.

Pair Corralation between FAT Brands and Chanson International

Considering the 90-day investment horizon FAT Brands is expected to generate 36.33 times less return on investment than Chanson International. But when comparing it to its historical volatility, FAT Brands is 7.1 times less risky than Chanson International. It trades about 0.01 of its potential returns per unit of risk. Chanson International Holding is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  245.00  in Chanson International Holding on October 11, 2024 and sell it today you would earn a total of  283.00  from holding Chanson International Holding or generate 115.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.3%
Values	Daily Returns

FAT Brands  vs.  Chanson International Holding

FAT Brands

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FAT Brands are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, FAT Brands may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chanson International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chanson International Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with FAT Brands and Chanson International

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

The idea behind FAT Brands and Chanson International Holding 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.