Correlation Between FAT Brands and Mind Technology

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

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

Diversification Opportunities for FAT Brands and Mind Technology

0.46

Correlation Coefficient

FAT Brands  Mind Technology

Very weak diversification

The 3 months correlation between FAT and Mind is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Mind Technology Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mind Technology Pref 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 Mind Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mind Technology Pref has no effect on the direction of FAT Brands i.e., FAT Brands and Mind Technology go up and down completely randomly.

Pair Corralation between FAT Brands and Mind Technology

Assuming the 90 days horizon FAT Brands is expected to under-perform the Mind Technology. But the preferred stock apears to be less risky and, when comparing its historical volatility, FAT Brands is 4.6 times less risky than Mind Technology. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Mind Technology Pref is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  714.00  in Mind Technology Pref on August 31, 2024 and sell it today you would lose (714.00) from holding Mind Technology Pref or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	83.69%
Values	Daily Returns

FAT Brands  vs.  Mind Technology Pref

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.

Mind Technology Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mind Technology Pref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Preferred Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with FAT Brands and Mind Technology

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

The idea behind FAT Brands and Mind Technology Pref 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.