Correlation Between Wendys and Albertsons Companies
Can any of the company-specific risk be diversified away by investing in both Wendys and Albertsons Companies 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 Wendys and Albertsons Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Wendys Co and Albertsons Companies, you can compare the effects of market volatilities on Wendys and Albertsons Companies 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 Wendys with a short position of Albertsons Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Albertsons Companies.
Diversification Opportunities for Wendys and Albertsons Companies
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wendys and Albertsons is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Albertsons Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albertsons Companies and Wendys 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 The Wendys Co are associated (or correlated) with Albertsons Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albertsons Companies has no effect on the direction of Wendys i.e., Wendys and Albertsons Companies go up and down completely randomly.
Pair Corralation between Wendys and Albertsons Companies
Considering the 90-day investment horizon The Wendys Co is expected to under-perform the Albertsons Companies. In addition to that, Wendys is 1.62 times more volatile than Albertsons Companies. It trades about -0.19 of its total potential returns per unit of risk. Albertsons Companies is currently generating about 0.23 per unit of volatility. If you would invest 1,834 in Albertsons Companies on August 29, 2024 and sell it today you would earn a total of 128.00 from holding Albertsons Companies or generate 6.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Wendys Co vs. Albertsons Companies
Performance |
| Timeline |
| The Wendys |
| Albertsons Companies |
Wendys and Albertsons Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and Albertsons Companies
The main advantage of trading using opposite Wendys and Albertsons Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Albertsons Companies 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 Albertsons Companies will offset losses from the drop in Albertsons Companies' long position.The idea behind The Wendys Co and Albertsons Companies 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.| Albertsons Companies vs. Sprouts Farmers Market | Albertsons Companies vs. Krispy Kreme | Albertsons Companies vs. Grocery Outlet Holding | Albertsons Companies vs. Weis Markets |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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