Correlation Between Wendys and Aptiv PLC
Can any of the company-specific risk be diversified away by investing in both Wendys and Aptiv PLC 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 Aptiv PLC 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 Aptiv PLC, you can compare the effects of market volatilities on Wendys and Aptiv PLC 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 Aptiv PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Aptiv PLC.
Diversification Opportunities for Wendys and Aptiv PLC
Very good diversification
The 3 months correlation between Wendys and Aptiv is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC 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 Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of Wendys i.e., Wendys and Aptiv PLC go up and down completely randomly.
Pair Corralation between Wendys and Aptiv PLC
Considering the 90-day investment horizon The Wendys Co is expected to generate 0.5 times more return on investment than Aptiv PLC. However, The Wendys Co is 1.98 times less risky than Aptiv PLC. It trades about -0.18 of its potential returns per unit of risk. Aptiv PLC is currently generating about -0.21 per unit of risk. If you would invest 2,031 in The Wendys Co on August 31, 2024 and sell it today you would lose (178.00) from holding The Wendys Co or give up 8.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Wendys Co vs. Aptiv PLC
Performance |
| Timeline |
| The Wendys |
| Aptiv PLC |
Wendys and Aptiv PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and Aptiv PLC
The main advantage of trading using opposite Wendys and Aptiv PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Aptiv PLC 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 Aptiv PLC will offset losses from the drop in Aptiv PLC's long position.| Wendys vs. RLJ Lodging Trust | Wendys vs. Aquagold International | Wendys vs. Stepstone Group | Wendys vs. Morningstar Unconstrained Allocation |
| Aptiv PLC vs. Allison Transmission Holdings | Aptiv PLC vs. LKQ Corporation | Aptiv PLC vs. Lear Corporation | Aptiv PLC vs. Magna 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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