Correlation Between Pyxis Tankers and FAT Brands

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

By analyzing existing cross correlation between Pyxis Tankers and FAT Brands, you can compare the effects of market volatilities on Pyxis Tankers and FAT Brands 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 Pyxis Tankers with a short position of FAT Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pyxis Tankers and FAT Brands.

Diversification Opportunities for Pyxis Tankers and FAT Brands

0.34

Correlation Coefficient

Pyxis Tankers  FAT Brands

Weak diversification

The 3 months correlation between Pyxis and FAT is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pyxis Tankers and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Pyxis Tankers 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 Pyxis Tankers are associated (or correlated) with FAT Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAT Brands has no effect on the direction of Pyxis Tankers i.e., Pyxis Tankers and FAT Brands go up and down completely randomly.

Pair Corralation between Pyxis Tankers and FAT Brands

Assuming the 90 days horizon Pyxis Tankers is expected to generate 5.14 times less return on investment than FAT Brands. But when comparing it to its historical volatility, Pyxis Tankers is 5.84 times less risky than FAT Brands. It trades about 0.05 of its potential returns per unit of risk. FAT Brands is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  935.00  in FAT Brands on September 25, 2024 and sell it today you would earn a total of  23.00  from holding FAT Brands or generate 2.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	38.1%
Values	Daily Returns

Pyxis Tankers  vs.  FAT Brands

Pyxis Tankers

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Pyxis Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Pyxis Tankers is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

FAT Brands

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FAT Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, FAT Brands is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Pyxis Tankers and FAT Brands

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

The idea behind Pyxis Tankers and FAT Brands 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.