Correlation Between FAT Brands and Oxford Lane

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

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

Diversification Opportunities for FAT Brands and Oxford Lane

0.47

Correlation Coefficient

FAT Brands  Oxford Lane

Very weak diversification

The 3 months correlation between FAT and Oxford is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Oxford Lane Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Lane Capital 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 Oxford Lane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Lane Capital has no effect on the direction of FAT Brands i.e., FAT Brands and Oxford Lane go up and down completely randomly.

Pair Corralation between FAT Brands and Oxford Lane

Assuming the 90 days horizon FAT Brands is expected to generate 1.23 times less return on investment than Oxford Lane. In addition to that, FAT Brands is 3.69 times more volatile than Oxford Lane Capital. It trades about 0.03 of its total potential returns per unit of risk. Oxford Lane Capital is currently generating about 0.15 per unit of volatility. If you would invest  2,365  in Oxford Lane Capital on December 28, 2024 and sell it today you would earn a total of  55.00  from holding Oxford Lane Capital or generate 2.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FAT Brands  vs.  Oxford Lane Capital

FAT Brands

Risk-Adjusted Performance

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. 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.

Oxford Lane Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oxford Lane Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Oxford Lane is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with FAT Brands and Oxford Lane

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

The idea behind FAT Brands and Oxford Lane Capital 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 Commodity Directory module to find actively traded commodities issued by global exchanges.