Correlation Between FAT Brands and Kura Sushi

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

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

Diversification Opportunities for FAT Brands and Kura Sushi

-0.15

Correlation Coefficient

FAT Brands  Kura Sushi

Good diversification

The 3 months correlation between FAT and Kura is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Kura Sushi USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kura Sushi USA 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 Kura Sushi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kura Sushi USA has no effect on the direction of FAT Brands i.e., FAT Brands and Kura Sushi go up and down completely randomly.

Pair Corralation between FAT Brands and Kura Sushi

Assuming the 90 days horizon FAT Brands is expected to under-perform the Kura Sushi. In addition to that, FAT Brands is 1.24 times more volatile than Kura Sushi USA. It trades about -0.01 of its total potential returns per unit of risk. Kura Sushi USA is currently generating about 0.16 per unit of volatility. If you would invest  9,103  in Kura Sushi USA on September 13, 2024 and sell it today you would earn a total of  1,022  from holding Kura Sushi USA or generate 11.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

FAT Brands  vs.  Kura Sushi USA

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. Despite somewhat weak fundamental drivers, FAT Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kura Sushi USA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kura Sushi USA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kura Sushi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FAT Brands and Kura Sushi

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

The idea behind FAT Brands and Kura Sushi USA 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.

Check out your portfolio center.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.