Correlation Between Figs and Wendys
Can any of the company-specific risk be diversified away by investing in both Figs 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 Figs and Wendys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Figs Inc and The Wendys Co, you can compare the effects of market volatilities on Figs 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 Figs with a short position of Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Figs and Wendys.
Diversification Opportunities for Figs and Wendys
Modest diversification
The 3 months correlation between Figs and Wendys is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Figs Inc and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Figs 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 Figs Inc 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 Figs i.e., Figs and Wendys go up and down completely randomly.
Pair Corralation between Figs and Wendys
Given the investment horizon of 90 days Figs Inc is expected to generate 2.7 times more return on investment than Wendys. However, Figs is 2.7 times more volatile than The Wendys Co. It trades about 0.0 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 757.00 in Figs Inc on August 31, 2024 and sell it today you would lose (243.00) from holding Figs Inc or give up 32.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Figs Inc vs. The Wendys Co
Performance |
| Timeline |
| Figs Inc |
| The Wendys |
Figs and Wendys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Figs and Wendys
The main advantage of trading using opposite Figs and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Figs 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 Figs Inc 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. RLJ Lodging Trust | Wendys vs. Aquagold International | Wendys vs. Stepstone Group | Wendys vs. Morningstar Unconstrained Allocation |
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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