Correlation Between FAT Brands and Carrols Restaurant

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

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

Diversification Opportunities for FAT Brands and Carrols Restaurant

0.0

Correlation Coefficient

FAT Brands  Carrols Restaurant

Pay attention - limited upside

The 3 months correlation between FAT and Carrols is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Carrols Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrols Restaurant 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 Carrols Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrols Restaurant has no effect on the direction of FAT Brands i.e., FAT Brands and Carrols Restaurant go up and down completely randomly.

Pair Corralation between FAT Brands and Carrols Restaurant

If you would invest  263.00  in FAT Brands on December 28, 2024 and sell it today you would earn a total of  22.00  from holding FAT Brands or generate 8.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

FAT Brands  vs.  Carrols Restaurant Group

FAT Brands

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FAT Brands are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, FAT Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Carrols Restaurant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carrols Restaurant Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Carrols Restaurant is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FAT Brands and Carrols Restaurant

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

The idea behind FAT Brands and Carrols Restaurant Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.