Correlation Between BT Brands and Wendys
Can any of the company-specific risk be diversified away by investing in both BT Brands 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 BT Brands and Wendys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BT Brands Warrant and The Wendys Co, you can compare the effects of market volatilities on BT Brands 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 BT Brands with a short position of Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of BT Brands and Wendys.
Diversification Opportunities for BT Brands and Wendys
Very good diversification
The 3 months correlation between BTBDW and Wendys is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding BT Brands Warrant and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and BT 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 BT Brands Warrant 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 BT Brands i.e., BT Brands and Wendys go up and down completely randomly.
Pair Corralation between BT Brands and Wendys
Assuming the 90 days horizon BT Brands Warrant is expected to generate 100.18 times more return on investment than Wendys. However, BT Brands is 100.18 times more volatile than The Wendys Co. It trades about 0.14 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.01 per unit of risk. If you would invest 12.00 in BT Brands Warrant on August 27, 2024 and sell it today you would lose (2.56) from holding BT Brands Warrant or give up 21.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 52.31% |
| Values | Daily Returns |
BT Brands Warrant vs. The Wendys Co
Performance |
| Timeline |
| BT Brands Warrant |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| The Wendys |
BT Brands and Wendys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BT Brands and Wendys
The main advantage of trading using opposite BT Brands and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BT Brands 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.The idea behind BT Brands Warrant and The Wendys Co 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.| Wendys vs. Yum Brands | Wendys vs. Dominos Pizza | Wendys vs. Darden Restaurants | Wendys vs. Papa Johns International |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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