Correlation Between Chuys Holdings and Nathans Famous

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

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

Diversification Opportunities for Chuys Holdings and Nathans Famous

0.48

Correlation Coefficient

Chuys Holdings  Nathans Famous

Very weak diversification

The 3 months correlation between Chuys and Nathans is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Chuys Holdings and Nathans Famous in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nathans Famous and Chuys Holdings 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 Chuys Holdings are associated (or correlated) with Nathans Famous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nathans Famous has no effect on the direction of Chuys Holdings i.e., Chuys Holdings and Nathans Famous go up and down completely randomly.

Pair Corralation between Chuys Holdings and Nathans Famous

Given the investment horizon of 90 days Chuys Holdings is expected to generate 8.62 times less return on investment than Nathans Famous. But when comparing it to its historical volatility, Chuys Holdings is 25.75 times less risky than Nathans Famous. It trades about 0.36 of its potential returns per unit of risk. Nathans Famous is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,645  in Nathans Famous on September 3, 2024 and sell it today you would earn a total of  1,116  from holding Nathans Famous or generate 14.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	45.31%
Values	Daily Returns

Chuys Holdings  vs.  Nathans Famous

Chuys Holdings

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Chuys Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chuys Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Nathans Famous

Risk-Adjusted Performance

9 of 100

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.

Pair Trading with Chuys Holdings and Nathans Famous

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

The idea behind Chuys Holdings and Nathans Famous 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.