Correlation Between Wendys and Freedom Bank
Can any of the company-specific risk be diversified away by investing in both Wendys and Freedom Bank 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 Freedom Bank 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 Freedom Bank of, you can compare the effects of market volatilities on Wendys and Freedom Bank 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 Freedom Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Freedom Bank.
Diversification Opportunities for Wendys and Freedom Bank
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Wendys and Freedom is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Wendys i.e., Wendys and Freedom Bank go up and down completely randomly.
Pair Corralation between Wendys and Freedom Bank
Considering the 90-day investment horizon The Wendys Co is expected to generate 1.14 times more return on investment than Freedom Bank. However, Wendys is 1.14 times more volatile than Freedom Bank of. It trades about -0.01 of its potential returns per unit of risk. Freedom Bank of is currently generating about -0.06 per unit of risk. If you would invest 2,052 in The Wendys Co on August 27, 2024 and sell it today you would lose (254.00) from holding The Wendys Co or give up 12.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 80.44% |
| Values | Daily Returns |
The Wendys Co vs. Freedom Bank of
Performance |
| Timeline |
| The Wendys |
| Freedom Bank |
Wendys and Freedom Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and Freedom Bank
The main advantage of trading using opposite Wendys and Freedom Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Freedom Bank 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 Freedom Bank will offset losses from the drop in Freedom Bank's long position.| Wendys vs. Yum Brands | Wendys vs. Dominos Pizza | Wendys vs. Darden Restaurants | Wendys vs. Papa Johns International |
| Freedom Bank vs. Washington Business Bank | Freedom Bank vs. National Capital Bank | Freedom Bank vs. Community Heritage Financial | Freedom Bank vs. Citizens Financial Corp |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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