Correlation Between Papa Johns and Wingstop
Can any of the company-specific risk be diversified away by investing in both Papa Johns and Wingstop 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 Papa Johns and Wingstop into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Papa Johns International and Wingstop, you can compare the effects of market volatilities on Papa Johns and Wingstop 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 Papa Johns with a short position of Wingstop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Papa Johns and Wingstop.
Diversification Opportunities for Papa Johns and Wingstop
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Papa and Wingstop is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Papa Johns International and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop and Papa Johns 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 Papa Johns International are associated (or correlated) with Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of Papa Johns i.e., Papa Johns and Wingstop go up and down completely randomly.
Pair Corralation between Papa Johns and Wingstop
Given the investment horizon of 90 days Papa Johns International is expected to under-perform the Wingstop. But the stock apears to be less risky and, when comparing its historical volatility, Papa Johns International is 1.97 times less risky than Wingstop. The stock trades about -0.1 of its potential returns per unit of risk. The Wingstop is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 36,631 in Wingstop on August 24, 2024 and sell it today you would lose (2,790) from holding Wingstop or give up 7.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Papa Johns International vs. Wingstop
Performance |
| Timeline |
| Papa Johns International |
| Wingstop |
Papa Johns and Wingstop Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Papa Johns and Wingstop
The main advantage of trading using opposite Papa Johns and Wingstop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Papa Johns position performs unexpectedly, Wingstop 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 Wingstop will offset losses from the drop in Wingstop's long position.| Papa Johns vs. Yum Brands | Papa Johns vs. Wingstop | Papa Johns vs. Darden Restaurants | Papa Johns vs. Chipotle Mexican Grill |
| Wingstop vs. Papa Johns International | Wingstop vs. Chipotle Mexican Grill | Wingstop vs. The Wendys Co | Wingstop vs. Dominos Pizza |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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