Correlation Between Ark Restaurants and Wendys
Can any of the company-specific risk be diversified away by investing in both Ark Restaurants and Wendys 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 Ark Restaurants and Wendys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ark Restaurants Corp and The Wendys Co, you can compare the effects of market volatilities on Ark Restaurants and Wendys 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 Ark Restaurants with a short position of Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ark Restaurants and Wendys.
Diversification Opportunities for Ark Restaurants and Wendys
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ark and Wendys is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ark Restaurants Corp and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Ark Restaurants 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 Ark Restaurants Corp are associated (or correlated) with Wendys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Wendys has no effect on the direction of Ark Restaurants i.e., Ark Restaurants and Wendys go up and down completely randomly.
Pair Corralation between Ark Restaurants and Wendys
Given the investment horizon of 90 days Ark Restaurants Corp is expected to under-perform the Wendys. But the stock apears to be less risky and, when comparing its historical volatility, Ark Restaurants Corp is 1.31 times less risky than Wendys. The stock trades about -0.41 of its potential returns per unit of risk. The The Wendys Co is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 1,918 in The Wendys Co on August 24, 2024 and sell it today you would lose (107.00) from holding The Wendys Co or give up 5.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ark Restaurants Corp vs. The Wendys Co
Performance |
| Timeline |
| Ark Restaurants Corp |
| The Wendys |
Ark Restaurants and Wendys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ark Restaurants and Wendys
The main advantage of trading using opposite Ark Restaurants and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ark Restaurants position performs unexpectedly, Wendys 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 Wendys will offset losses from the drop in Wendys' long position.| Ark Restaurants vs. Bloomin Brands | Ark Restaurants vs. BJs Restaurants | Ark Restaurants vs. Darden Restaurants | Ark Restaurants vs. Wingstop |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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