Correlation Between Nathans Famous and Portillos

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

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

Diversification Opportunities for Nathans Famous and Portillos

-0.39

Correlation Coefficient

Nathans Famous  Portillos

Very good diversification

The 3 months correlation between Nathans and Portillos is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nathans Famous and Portillos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portillos 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 Portillos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portillos has no effect on the direction of Nathans Famous i.e., Nathans Famous and Portillos go up and down completely randomly.

Pair Corralation between Nathans Famous and Portillos

Given the investment horizon of 90 days Nathans Famous is expected to generate 0.79 times more return on investment than Portillos. However, Nathans Famous is 1.26 times less risky than Portillos. It trades about 0.11 of its potential returns per unit of risk. Portillos is currently generating about -0.14 per unit of risk. If you would invest  7,753  in Nathans Famous on September 13, 2024 and sell it today you would earn a total of  956.00  from holding Nathans Famous or generate 12.33% return on investment over 90 days.

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

Nathans Famous  vs.  Portillos

Nathans Famous

Risk-Adjusted Performance

8 of 100

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 conflicting basic indicators, Nathans Famous demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Portillos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Portillos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nathans Famous and Portillos

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

The idea behind Nathans Famous and Portillos 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.