Correlation Between FAT Brands and Burgerfi International

Can any of the company-specific risk be diversified away by investing in both FAT Brands and Burgerfi 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 Burgerfi 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 Burgerfi International, you can compare the effects of market volatilities on FAT Brands and Burgerfi 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 Burgerfi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Burgerfi International.

Diversification Opportunities for FAT Brands and Burgerfi International

-0.07

Correlation Coefficient

FAT Brands  Burgerfi International

Good diversification

The 3 months correlation between FAT and Burgerfi is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Burgerfi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burgerfi 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 Burgerfi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burgerfi International has no effect on the direction of FAT Brands i.e., FAT Brands and Burgerfi International go up and down completely randomly.

Pair Corralation between FAT Brands and Burgerfi International

Assuming the 90 days horizon FAT Brands is expected to generate 0.49 times more return on investment than Burgerfi International. However, FAT Brands is 2.06 times less risky than Burgerfi International. It trades about 0.02 of its potential returns per unit of risk. Burgerfi International is currently generating about -0.03 per unit of risk. If you would invest  433.00  in FAT Brands on September 28, 2024 and sell it today you would earn a total of  13.00  from holding FAT Brands or generate 3.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.67%
Values	Daily Returns

FAT Brands  vs.  Burgerfi International

FAT Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FAT Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, FAT Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Burgerfi International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Burgerfi International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Burgerfi International is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with FAT Brands and Burgerfi International

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

The idea behind FAT Brands and Burgerfi International 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.