Correlation Between FAT Brands and Wendys
Can any of the company-specific risk be diversified away by investing in both FAT 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 FAT Brands and Wendys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAT Brands and The Wendys Co, you can compare the effects of market volatilities on FAT 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 FAT Brands with a short position of Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Wendys.
Diversification Opportunities for FAT Brands and Wendys
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FAT and Wendys is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and FAT 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 FAT Brands 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 FAT Brands i.e., FAT Brands and Wendys go up and down completely randomly.
Pair Corralation between FAT Brands and Wendys
Assuming the 90 days horizon FAT Brands is expected to generate 1.38 times more return on investment than Wendys. However, FAT Brands is 1.38 times more volatile than The Wendys Co. It trades about 0.02 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.1 per unit of risk. If you would invest 438.00 in FAT Brands on August 24, 2024 and sell it today you would earn a total of 2.00 from holding FAT Brands or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAT Brands vs. The Wendys Co
Performance |
| Timeline |
| FAT Brands |
| The Wendys |
FAT Brands and Wendys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAT Brands and Wendys
The main advantage of trading using opposite FAT Brands and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT 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.| FAT Brands vs. FAT Brands | FAT Brands vs. Brinker International | FAT Brands vs. Jack In The | FAT Brands vs. Potbelly Co |
| 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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