Correlation Between Nathans Famous and Noodles

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

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

Diversification Opportunities for Nathans Famous and Noodles

-0.56

Correlation Coefficient

Nathans Famous  Noodles

Excellent diversification

The 3 months correlation between Nathans and Noodles is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nathans Famous and Noodles Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noodles Company and Nathans Famous 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 Nathans Famous are associated (or correlated) with Noodles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noodles Company has no effect on the direction of Nathans Famous i.e., Nathans Famous and Noodles go up and down completely randomly.

Pair Corralation between Nathans Famous and Noodles

Given the investment horizon of 90 days Nathans Famous is expected to generate 0.38 times more return on investment than Noodles. However, Nathans Famous is 2.63 times less risky than Noodles. It trades about 0.1 of its potential returns per unit of risk. Noodles Company is currently generating about -0.2 per unit of risk. If you would invest  7,753  in Nathans Famous on September 13, 2024 and sell it today you would earn a total of  956.00  from holding Nathans Famous or generate 12.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Nathans Famous  vs.  Noodles Company

Nathans Famous

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nathans Famous are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Nathans Famous may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Noodles Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noodles Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Nathans Famous and Noodles

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

The idea behind Nathans Famous and Noodles Company 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.