Correlation Between FAT Brands and Air T

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

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

Diversification Opportunities for FAT Brands and Air T

0.09

Correlation Coefficient

FAT Brands  Air T

Significant diversification

The 3 months correlation between FAT and Air is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Air T Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air T Inc 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 Air T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air T Inc has no effect on the direction of FAT Brands i.e., FAT Brands and Air T go up and down completely randomly.

Pair Corralation between FAT Brands and Air T

Assuming the 90 days horizon FAT Brands is expected to under-perform the Air T. But the preferred stock apears to be less risky and, when comparing its historical volatility, FAT Brands is 1.39 times less risky than Air T. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Air T Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,858  in Air T Inc on September 13, 2024 and sell it today you would lose (133.00) from holding Air T Inc or give up 7.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.76%
Values	Daily Returns

FAT Brands  vs.  Air T Inc

FAT Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FAT Brands has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Air T Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air T Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Air T is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with FAT Brands and Air T

The main advantage of trading using opposite FAT Brands and Air T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, Air T 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 Air T will offset losses from the drop in Air T's long position.

The idea behind FAT Brands and Air T Inc 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.