Correlation Between Wendys and Corporacion America
Can any of the company-specific risk be diversified away by investing in both Wendys and Corporacion America 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 Corporacion America 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 Corporacion America Airports, you can compare the effects of market volatilities on Wendys and Corporacion America 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 Corporacion America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Corporacion America.
Diversification Opportunities for Wendys and Corporacion America
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wendys and Corporacion is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Corporacion America Airports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporacion America 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 Corporacion America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporacion America has no effect on the direction of Wendys i.e., Wendys and Corporacion America go up and down completely randomly.
Pair Corralation between Wendys and Corporacion America
Considering the 90-day investment horizon The Wendys Co is expected to under-perform the Corporacion America. But the stock apears to be less risky and, when comparing its historical volatility, The Wendys Co is 1.51 times less risky than Corporacion America. The stock trades about -0.2 of its potential returns per unit of risk. The Corporacion America Airports is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,878 in Corporacion America Airports on September 3, 2024 and sell it today you would earn a total of 12.00 from holding Corporacion America Airports or generate 0.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Wendys Co vs. Corporacion America Airports
Performance |
| Timeline |
| The Wendys |
| Corporacion America |
Wendys and Corporacion America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and Corporacion America
The main advantage of trading using opposite Wendys and Corporacion America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Corporacion America 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 Corporacion America will offset losses from the drop in Corporacion America's long position.| Wendys vs. Highway Holdings Limited | Wendys vs. QCR Holdings | Wendys vs. Partner Communications | Wendys vs. Acumen Pharmaceuticals |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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