Correlation Between Carrols Restaurant and Nathans Famous

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

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

Diversification Opportunities for Carrols Restaurant and Nathans Famous

0.62

Correlation Coefficient

Carrols Restaurant  Nathans Famous

Poor diversification

The 3 months correlation between Carrols and Nathans is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Carrols Restaurant Group and Nathans Famous in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nathans Famous and Carrols Restaurant 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 Carrols Restaurant Group are associated (or correlated) with Nathans Famous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nathans Famous has no effect on the direction of Carrols Restaurant i.e., Carrols Restaurant and Nathans Famous go up and down completely randomly.

Pair Corralation between Carrols Restaurant and Nathans Famous

If you would invest  8,373  in Nathans Famous on September 1, 2024 and sell it today you would earn a total of  377.00  from holding Nathans Famous or generate 4.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Carrols Restaurant Group  vs.  Nathans Famous

Carrols Restaurant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrols Restaurant Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Carrols Restaurant is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Nathans Famous

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nathans Famous are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Nathans Famous demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carrols Restaurant and Nathans Famous

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

The idea behind Carrols Restaurant Group and Nathans Famous 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.