Correlation Between Jack In and FAT Brands

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

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

Diversification Opportunities for Jack In and FAT Brands

-0.37

Correlation Coefficient

Jack In  FAT Brands

Very good diversification

The 3 months correlation between Jack and FAT is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Jack In The and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Jack In 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 Jack In The are associated (or correlated) with FAT Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAT Brands has no effect on the direction of Jack In i.e., Jack In and FAT Brands go up and down completely randomly.

Pair Corralation between Jack In and FAT Brands

Given the investment horizon of 90 days Jack In The is expected to generate 0.8 times more return on investment than FAT Brands. However, Jack In The is 1.25 times less risky than FAT Brands. It trades about -0.1 of its potential returns per unit of risk. FAT Brands is currently generating about -0.19 per unit of risk. If you would invest  3,999  in Jack In The on December 4, 2024 and sell it today you would lose (398.00) from holding Jack In The or give up 9.95% of portfolio value over 90 days.

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

Jack In The  vs.  FAT Brands

Jack In

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jack In The has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

FAT Brands

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FAT Brands are ranked lower than 5 (%) 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.

Pair Trading with Jack In and FAT Brands

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

The idea behind Jack In The and FAT 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.