Correlation Between Good Times and Nathans Famous

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

By analyzing existing cross correlation between Good Times Restaurants and Nathans Famous, you can compare the effects of market volatilities on Good Times and Nathans Famous 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 Good Times with a short position of Nathans Famous. Check out your portfolio center. Please also check ongoing floating volatility patterns of Good Times and Nathans Famous.

Diversification Opportunities for Good Times and Nathans Famous

-0.27

Correlation Coefficient

Good Times  Nathans Famous

Very good diversification

The 3 months correlation between Good and Nathans is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and Nathans Famous in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nathans Famous and Good Times 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 Good Times Restaurants are associated (or correlated) with Nathans Famous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nathans Famous has no effect on the direction of Good Times i.e., Good Times and Nathans Famous go up and down completely randomly.

Pair Corralation between Good Times and Nathans Famous

Given the investment horizon of 90 days Good Times Restaurants is expected to under-perform the Nathans Famous. But the stock apears to be less risky and, when comparing its historical volatility, Good Times Restaurants is 1.24 times less risky than Nathans Famous. The stock trades about -0.03 of its potential returns per unit of risk. The Nathans Famous is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,856  in Nathans Famous on December 27, 2024 and sell it today you would earn a total of  1,637  from holding Nathans Famous or generate 20.84% return on investment over 90 days.

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

Good Times Restaurants  vs.  Nathans Famous

Good Times Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Good Times is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Nathans Famous

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nathans Famous are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Nathans Famous demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Good Times and Nathans Famous

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

The idea behind Good Times Restaurants and Nathans Famous 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.