Correlation Between Dutch Bros and Wendys
Can any of the company-specific risk be diversified away by investing in both Dutch Bros 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 Dutch Bros and Wendys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dutch Bros and The Wendys Co, you can compare the effects of market volatilities on Dutch Bros 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 Dutch Bros with a short position of Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dutch Bros and Wendys.
Diversification Opportunities for Dutch Bros and Wendys
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dutch and Wendys is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dutch Bros and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Dutch Bros 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 Dutch Bros 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 Dutch Bros i.e., Dutch Bros and Wendys go up and down completely randomly.
Pair Corralation between Dutch Bros and Wendys
Given the investment horizon of 90 days Dutch Bros is expected to generate 2.88 times more return on investment than Wendys. However, Dutch Bros is 2.88 times more volatile than The Wendys Co. It trades about 0.38 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.18 per unit of risk. If you would invest 3,308 in Dutch Bros on August 31, 2024 and sell it today you would earn a total of 2,007 from holding Dutch Bros or generate 60.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dutch Bros vs. The Wendys Co
Performance |
| Timeline |
| Dutch Bros |
| The Wendys |
Dutch Bros and Wendys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dutch Bros and Wendys
The main advantage of trading using opposite Dutch Bros and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dutch Bros 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.| Dutch Bros vs. Wingstop | Dutch Bros vs. RLJ Lodging Trust | Dutch Bros vs. Aquagold International | Dutch Bros vs. Stepstone Group |
| Wendys vs. Wingstop | Wendys vs. RLJ Lodging Trust | Wendys vs. Aquagold International | Wendys vs. Stepstone Group |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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