Correlation Between BurgerFi International and Capital Southwest

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

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

Diversification Opportunities for BurgerFi International and Capital Southwest

-0.57

Correlation Coefficient

BurgerFi International  Capital Southwest

Excellent diversification

The 3 months correlation between BurgerFi and Capital is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding BurgerFi International LLC and Capital Southwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Southwest and BurgerFi 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 BurgerFi International LLC are associated (or correlated) with Capital Southwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Southwest has no effect on the direction of BurgerFi International i.e., BurgerFi International and Capital Southwest go up and down completely randomly.

Pair Corralation between BurgerFi International and Capital Southwest

Assuming the 90 days horizon BurgerFi International LLC is expected to generate 16.46 times more return on investment than Capital Southwest. However, BurgerFi International is 16.46 times more volatile than Capital Southwest. It trades about 0.08 of its potential returns per unit of risk. Capital Southwest is currently generating about 0.14 per unit of risk. If you would invest  7.20  in BurgerFi International LLC on February 26, 2024 and sell it today you would lose (3.91) from holding BurgerFi International LLC or give up 54.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.97%
Values	Daily Returns

BurgerFi International LLC  vs.  Capital Southwest

BurgerFi International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BurgerFi International LLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward indicators, BurgerFi International showed solid returns over the last few months and may actually be approaching a breakup point.

Capital Southwest

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Southwest are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Capital Southwest may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with BurgerFi International and Capital Southwest

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

The idea behind BurgerFi International LLC and Capital Southwest 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.