Correlation Between Nathans Famous and Four Leaf

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

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

Diversification Opportunities for Nathans Famous and Four Leaf

-0.59

Correlation Coefficient

Nathans Famous  Four Leaf

Excellent diversification

The 3 months correlation between Nathans and Four is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Nathans Famous and Four Leaf Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Leaf Acquisition and Nathans Famous 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 Nathans Famous are associated (or correlated) with Four Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Leaf Acquisition has no effect on the direction of Nathans Famous i.e., Nathans Famous and Four Leaf go up and down completely randomly.

Pair Corralation between Nathans Famous and Four Leaf

Given the investment horizon of 90 days Nathans Famous is expected to under-perform the Four Leaf. In addition to that, Nathans Famous is 11.72 times more volatile than Four Leaf Acquisition. It trades about -0.04 of its total potential returns per unit of risk. Four Leaf Acquisition is currently generating about 0.08 per unit of volatility. If you would invest  1,101  in Four Leaf Acquisition on October 23, 2024 and sell it today you would earn a total of  9.00  from holding Four Leaf Acquisition or generate 0.82% return on investment over 90 days.

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

Nathans Famous  vs.  Four Leaf Acquisition

Nathans Famous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nathans Famous has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nathans Famous is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Four Leaf Acquisition

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Four Leaf Acquisition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Four Leaf is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nathans Famous and Four Leaf

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

The idea behind Nathans Famous and Four Leaf Acquisition 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.