Correlation Between Nathans Famous and Jollibee Foods

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

By analyzing existing cross correlation between Nathans Famous and Jollibee Foods Corp, you can compare the effects of market volatilities on Nathans Famous and Jollibee Foods 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 Jollibee Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nathans Famous and Jollibee Foods.

Diversification Opportunities for Nathans Famous and Jollibee Foods

0.1

Correlation Coefficient

Nathans Famous  Jollibee Foods

Average diversification

The 3 months correlation between Nathans and Jollibee is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nathans Famous and Jollibee Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jollibee Foods Corp 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 Jollibee Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jollibee Foods Corp has no effect on the direction of Nathans Famous i.e., Nathans Famous and Jollibee Foods go up and down completely randomly.

Pair Corralation between Nathans Famous and Jollibee Foods

Given the investment horizon of 90 days Nathans Famous is expected to generate 0.75 times more return on investment than Jollibee Foods. However, Nathans Famous is 1.33 times less risky than Jollibee Foods. It trades about 0.11 of its potential returns per unit of risk. Jollibee Foods Corp is currently generating about -0.03 per unit of risk. If you would invest  8,638  in Nathans Famous on December 4, 2024 and sell it today you would earn a total of  1,453  from holding Nathans Famous or generate 16.82% return on investment over 90 days.

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

Nathans Famous  vs.  Jollibee Foods Corp

Nathans Famous

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nathans Famous are ranked lower than 8 (%) 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.

Jollibee Foods Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jollibee Foods Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nathans Famous and Jollibee Foods

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

The idea behind Nathans Famous and Jollibee Foods Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.