Correlation Between FAT Brands and Micromobility

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

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

Diversification Opportunities for FAT Brands and Micromobility

-0.63

Correlation Coefficient

FAT Brands  Micromobility

Excellent diversification

The 3 months correlation between FAT and Micromobility is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Micromobility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micromobility 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 Micromobility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micromobility has no effect on the direction of FAT Brands i.e., FAT Brands and Micromobility go up and down completely randomly.

Pair Corralation between FAT Brands and Micromobility

If you would invest  1.72  in Micromobility on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Micromobility or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.79%
Values	Daily Returns

FAT Brands  vs.  Micromobility

FAT Brands

Risk-Adjusted Performance

4 of 100

Modest

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. 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.

Micromobility

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micromobility has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Micromobility is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with FAT Brands and Micromobility

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

The idea behind FAT Brands and Micromobility 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.