Correlation Between FAT Brands and Ark Restaurants

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

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

Diversification Opportunities for FAT Brands and Ark Restaurants

0.04

Correlation Coefficient

FAT Brands  Ark Restaurants

Significant diversification

The 3 months correlation between FAT and Ark is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp and FAT Brands 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 FAT Brands are associated (or correlated) with Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of FAT Brands i.e., FAT Brands and Ark Restaurants go up and down completely randomly.

Pair Corralation between FAT Brands and Ark Restaurants

Assuming the 90 days horizon FAT Brands is expected to under-perform the Ark Restaurants. In addition to that, FAT Brands is 1.58 times more volatile than Ark Restaurants Corp. It trades about 0.0 of its total potential returns per unit of risk. Ark Restaurants Corp is currently generating about 0.0 per unit of volatility. If you would invest  1,618  in Ark Restaurants Corp on September 12, 2024 and sell it today you would lose (239.00) from holding Ark Restaurants Corp or give up 14.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.89%
Values	Daily Returns

FAT Brands  vs.  Ark Restaurants Corp

FAT Brands

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FAT Brands are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, FAT Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ark Restaurants Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward-looking signals, Ark Restaurants reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FAT Brands and Ark Restaurants

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

The idea behind FAT Brands and Ark Restaurants Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.