Correlation Between TH International and Potbelly

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

By analyzing existing cross correlation between TH International Limited and Potbelly Co, you can compare the effects of market volatilities on TH International and Potbelly 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 TH International with a short position of Potbelly. Check out your portfolio center. Please also check ongoing floating volatility patterns of TH International and Potbelly.

Diversification Opportunities for TH International and Potbelly

0.49

Correlation Coefficient

TH International  Potbelly

Very weak diversification

The 3 months correlation between THCH and Potbelly is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding TH International Limited and Potbelly Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potbelly and TH International 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 TH International Limited are associated (or correlated) with Potbelly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potbelly has no effect on the direction of TH International i.e., TH International and Potbelly go up and down completely randomly.

Pair Corralation between TH International and Potbelly

Given the investment horizon of 90 days TH International is expected to generate 2.0 times less return on investment than Potbelly. In addition to that, TH International is 1.65 times more volatile than Potbelly Co. It trades about 0.04 of its total potential returns per unit of risk. Potbelly Co is currently generating about 0.12 per unit of volatility. If you would invest  783.00  in Potbelly Co on September 15, 2024 and sell it today you would earn a total of  193.00  from holding Potbelly Co or generate 24.65% return on investment over 90 days.

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

TH International Limited  vs.  Potbelly Co

TH International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TH International Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, TH International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Potbelly

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with TH International and Potbelly

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

The idea behind TH International Limited and Potbelly Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.