Correlation Between Nathans Famous and DraftKings

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

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

Diversification Opportunities for Nathans Famous and DraftKings

-0.24

Correlation Coefficient

Nathans Famous  DraftKings

Very good diversification

The 3 months correlation between Nathans and DraftKings is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Nathans Famous and DraftKings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DraftKings 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 DraftKings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DraftKings has no effect on the direction of Nathans Famous i.e., Nathans Famous and DraftKings go up and down completely randomly.

Pair Corralation between Nathans Famous and DraftKings

Given the investment horizon of 90 days Nathans Famous is expected to generate 0.35 times more return on investment than DraftKings. However, Nathans Famous is 2.86 times less risky than DraftKings. It trades about -0.26 of its potential returns per unit of risk. DraftKings is currently generating about -0.23 per unit of risk. If you would invest  6,835  in Nathans Famous on January 25, 2024 and sell it today you would lose (347.00) from holding Nathans Famous or give up 5.08% of portfolio value over 90 days.

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

Nathans Famous  vs.  DraftKings

Nathans Famous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nathans Famous has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

DraftKings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DraftKings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, DraftKings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Nathans Famous and DraftKings

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

The idea behind Nathans Famous and DraftKings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.