Correlation Between Mattel and Franchise

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

By analyzing existing cross correlation between Mattel Inc and Franchise Group, you can compare the effects of market volatilities on Mattel and Franchise 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 Mattel with a short position of Franchise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mattel and Franchise.

Diversification Opportunities for Mattel and Franchise

0.0

Correlation Coefficient

Mattel  Franchise

Pay attention - limited upside

The 3 months correlation between Mattel and Franchise is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and Franchise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franchise Group and Mattel 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 Mattel Inc are associated (or correlated) with Franchise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franchise Group has no effect on the direction of Mattel i.e., Mattel and Franchise go up and down completely randomly.

Pair Corralation between Mattel and Franchise

If you would invest  1,786  in Mattel Inc on December 20, 2024 and sell it today you would earn a total of  217.00  from holding Mattel Inc or generate 12.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Mattel Inc  vs.  Franchise Group

Mattel Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mattel Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Mattel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Franchise Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franchise Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franchise is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Mattel and Franchise

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

The idea behind Mattel Inc and Franchise Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.