Correlation Between Potbelly and Bagger Daves

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

By analyzing existing cross correlation between Potbelly Co and Bagger Daves Burger, you can compare the effects of market volatilities on Potbelly and Bagger Daves 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 Potbelly with a short position of Bagger Daves. Check out your portfolio center. Please also check ongoing floating volatility patterns of Potbelly and Bagger Daves.

Diversification Opportunities for Potbelly and Bagger Daves

-0.46

Correlation Coefficient

Potbelly  Bagger Daves

Very good diversification

The 3 months correlation between Potbelly and Bagger is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Potbelly Co and Bagger Daves Burger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bagger Daves Burger and Potbelly 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 Potbelly Co are associated (or correlated) with Bagger Daves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bagger Daves Burger has no effect on the direction of Potbelly i.e., Potbelly and Bagger Daves go up and down completely randomly.

Pair Corralation between Potbelly and Bagger Daves

Given the investment horizon of 90 days Potbelly Co is expected to generate 0.85 times more return on investment than Bagger Daves. However, Potbelly Co is 1.17 times less risky than Bagger Daves. It trades about 0.21 of its potential returns per unit of risk. Bagger Daves Burger is currently generating about 0.15 per unit of risk. If you would invest  921.00  in Potbelly Co on October 23, 2024 and sell it today you would earn a total of  128.00  from holding Potbelly Co or generate 13.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Potbelly Co  vs.  Bagger Daves Burger

Potbelly

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Potbelly Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Potbelly sustained solid returns over the last few months and may actually be approaching a breakup point.

Bagger Daves Burger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bagger Daves Burger has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bagger Daves is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Potbelly and Bagger Daves

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

The idea behind Potbelly Co and Bagger Daves Burger 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.