Correlation Between Nathans Famous and Weibo Corp

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

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

Diversification Opportunities for Nathans Famous and Weibo Corp

0.76

Correlation Coefficient

Nathans Famous  Weibo Corp

Poor diversification

The 3 months correlation between Nathans and Weibo is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nathans Famous and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Nathans Famous i.e., Nathans Famous and Weibo Corp go up and down completely randomly.

Pair Corralation between Nathans Famous and Weibo Corp

Given the investment horizon of 90 days Nathans Famous is expected to generate 0.92 times more return on investment than Weibo Corp. However, Nathans Famous is 1.08 times less risky than Weibo Corp. It trades about 0.12 of its potential returns per unit of risk. Weibo Corp is currently generating about 0.07 per unit of risk. If you would invest  8,143  in Nathans Famous on December 19, 2024 and sell it today you would earn a total of  1,413  from holding Nathans Famous or generate 17.35% return on investment over 90 days.

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

Nathans Famous  vs.  Weibo 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 9 (%) 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.

Weibo Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Weibo Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nathans Famous and Weibo Corp

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

The idea behind Nathans Famous and Weibo 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.