Correlation Between CareCloud and FAT Brands

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

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

Diversification Opportunities for CareCloud and FAT Brands

-0.15

Correlation Coefficient

CareCloud  FAT Brands

Good diversification

The 3 months correlation between CareCloud and FAT is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding CareCloud and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and CareCloud 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 CareCloud 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 CareCloud i.e., CareCloud and FAT Brands go up and down completely randomly.

Pair Corralation between CareCloud and FAT Brands

Assuming the 90 days horizon CareCloud is expected to generate 4.01 times more return on investment than FAT Brands. However, CareCloud is 4.01 times more volatile than FAT Brands. It trades about 0.12 of its potential returns per unit of risk. FAT Brands is currently generating about 0.05 per unit of risk. If you would invest  1,255  in CareCloud on September 2, 2024 and sell it today you would earn a total of  443.00  from holding CareCloud or generate 35.3% return on investment over 90 days.

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

CareCloud  vs.  FAT Brands

CareCloud

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CareCloud are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, CareCloud displayed solid returns over the last few months and may actually be approaching a breakup point.

FAT Brands

Risk-Adjusted Performance

3 of 100

Insignificant

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 CareCloud and FAT Brands

The main advantage of trading using opposite CareCloud and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CareCloud 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 CareCloud 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.