Correlation Between Carrols Restaurant and Flanigans Enterprises

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

By analyzing existing cross correlation between Carrols Restaurant Group and Flanigans Enterprises, you can compare the effects of market volatilities on Carrols Restaurant and Flanigans Enterprises 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 Carrols Restaurant with a short position of Flanigans Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carrols Restaurant and Flanigans Enterprises.

Diversification Opportunities for Carrols Restaurant and Flanigans Enterprises

-0.46

Correlation Coefficient

Carrols Restaurant  Flanigans Enterprises

Very good diversification

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

Pair Corralation between Carrols Restaurant and Flanigans Enterprises

Given the investment horizon of 90 days Carrols Restaurant is expected to generate 1.7 times less return on investment than Flanigans Enterprises. But when comparing it to its historical volatility, Carrols Restaurant Group is 9.09 times less risky than Flanigans Enterprises. It trades about 0.22 of its potential returns per unit of risk. Flanigans Enterprises is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,505  in Flanigans Enterprises on September 20, 2024 and sell it today you would lose (80.00) from holding Flanigans Enterprises or give up 3.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	29.6%
Values	Daily Returns

Carrols Restaurant Group  vs.  Flanigans Enterprises

Carrols Restaurant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrols Restaurant Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Carrols Restaurant is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Flanigans Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flanigans Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Carrols Restaurant and Flanigans Enterprises

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

The idea behind Carrols Restaurant Group and Flanigans Enterprises 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.