Correlation Between FAT Brands and Quantumscape Corp

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Can any of the company-specific risk be diversified away by investing in both FAT Brands and Quantumscape 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 Quantumscape 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 Quantumscape Corp, you can compare the effects of market volatilities on FAT Brands and Quantumscape 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 Quantumscape Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Quantumscape Corp.

Diversification Opportunities for FAT Brands and Quantumscape Corp

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between FAT and Quantumscape is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Quantumscape Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantumscape 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 Quantumscape Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantumscape Corp has no effect on the direction of FAT Brands i.e., FAT Brands and Quantumscape Corp go up and down completely randomly.

Pair Corralation between FAT Brands and Quantumscape Corp

Assuming the 90 days horizon FAT Brands is expected to generate 1.19 times more return on investment than Quantumscape Corp. However, FAT Brands is 1.19 times more volatile than Quantumscape Corp. It trades about 0.02 of its potential returns per unit of risk. Quantumscape Corp is currently generating about -0.05 per unit of risk. If you would invest  297.00  in FAT Brands on March 14, 2025 and sell it today you would lose (22.00) from holding FAT Brands or give up 7.41% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

FAT Brands  vs.  Quantumscape Corp

 Performance 
       Timeline  
FAT Brands 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days FAT Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, FAT Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Quantumscape Corp 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Quantumscape Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Quantumscape Corp may actually be approaching a critical reversion point that can send shares even higher in July 2025.

FAT Brands and Quantumscape Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FAT Brands and Quantumscape Corp

The main advantage of trading using opposite FAT Brands and Quantumscape Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands position performs unexpectedly, Quantumscape 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 Quantumscape Corp will offset losses from the drop in Quantumscape Corp's long position.
The idea behind FAT Brands and Quantumscape 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.
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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