Correlation Between FAT Brands and Brunswick Corp

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

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

Diversification Opportunities for FAT Brands and Brunswick Corp

-0.41

Correlation Coefficient

FAT Brands  Brunswick Corp

Very good diversification

The 3 months correlation between FAT and Brunswick is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Brunswick Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick 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 Brunswick Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunswick Corp has no effect on the direction of FAT Brands i.e., FAT Brands and Brunswick Corp go up and down completely randomly.

Pair Corralation between FAT Brands and Brunswick Corp

Assuming the 90 days horizon FAT Brands is expected to generate 2.4 times more return on investment than Brunswick Corp. However, FAT Brands is 2.4 times more volatile than Brunswick Corp. It trades about 0.05 of its potential returns per unit of risk. Brunswick Corp is currently generating about 0.11 per unit of risk. If you would invest  978.00  in FAT Brands on September 3, 2024 and sell it today you would earn a total of  33.00  from holding FAT Brands or generate 3.37% return on investment over 90 days.

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

FAT Brands  vs.  Brunswick Corp

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.

Brunswick Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brunswick Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brunswick Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FAT Brands and Brunswick Corp

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

The idea behind FAT Brands and Brunswick 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.