Correlation Between FAT Brands and Bloomin Brands

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

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

Diversification Opportunities for FAT Brands and Bloomin Brands

-0.29

Correlation Coefficient

FAT Brands  Bloomin Brands

Very good diversification

The 3 months correlation between FAT and Bloomin is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Bloomin Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloomin Brands 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 Bloomin Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloomin Brands has no effect on the direction of FAT Brands i.e., FAT Brands and Bloomin Brands go up and down completely randomly.

Pair Corralation between FAT Brands and Bloomin Brands

Assuming the 90 days horizon FAT Brands is expected to generate 0.75 times more return on investment than Bloomin Brands. However, FAT Brands is 1.34 times less risky than Bloomin Brands. It trades about -0.02 of its potential returns per unit of risk. Bloomin Brands is currently generating about -0.02 per unit of risk. If you would invest  1,241  in FAT Brands on September 21, 2024 and sell it today you would lose (291.00) from holding FAT Brands or give up 23.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

FAT Brands  vs.  Bloomin Brands

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. Even with relatively invariable fundamental drivers, FAT Brands is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Bloomin Brands

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with FAT Brands and Bloomin Brands

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

The idea behind FAT Brands and Bloomin Brands 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.