Correlation Between FAT Brands and Noodles

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

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

Diversification Opportunities for FAT Brands and Noodles

-0.43

Correlation Coefficient

FAT Brands  Noodles

Very good diversification

The 3 months correlation between FAT and Noodles is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Noodles Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noodles Company 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 Noodles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noodles Company has no effect on the direction of FAT Brands i.e., FAT Brands and Noodles go up and down completely randomly.

Pair Corralation between FAT Brands and Noodles

Considering the 90-day investment horizon FAT Brands is expected to generate 0.68 times more return on investment than Noodles. However, FAT Brands is 1.46 times less risky than Noodles. It trades about 0.01 of its potential returns per unit of risk. Noodles Company is currently generating about -0.09 per unit of risk. If you would invest  545.00  in FAT Brands on October 3, 2024 and sell it today you would lose (13.00) from holding FAT Brands or give up 2.39% of portfolio value over 90 days.

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

FAT Brands  vs.  Noodles Company

FAT Brands

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FAT Brands are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, FAT Brands unveiled solid returns over the last few months and may actually be approaching a breakup point.

Noodles Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noodles Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with FAT Brands and Noodles

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

The idea behind FAT Brands and Noodles Company 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.