Correlation Between Wendys and Golden Entertainment
Can any of the company-specific risk be diversified away by investing in both Wendys and Golden Entertainment 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 Golden Entertainment 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 Golden Entertainment, you can compare the effects of market volatilities on Wendys and Golden Entertainment 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 Golden Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Golden Entertainment.
Diversification Opportunities for Wendys and Golden Entertainment
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wendys and Golden is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Golden Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Entertainment 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 Golden Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Entertainment has no effect on the direction of Wendys i.e., Wendys and Golden Entertainment go up and down completely randomly.
Pair Corralation between Wendys and Golden Entertainment
Considering the 90-day investment horizon The Wendys Co is expected to under-perform the Golden Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, The Wendys Co is 1.08 times less risky than Golden Entertainment. The stock trades about -0.66 of its potential returns per unit of risk. The Golden Entertainment is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,111 in Golden Entertainment on October 23, 2024 and sell it today you would earn a total of 216.00 from holding Golden Entertainment or generate 6.94% 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. Golden Entertainment
Performance |
| Timeline |
| The Wendys |
| Golden Entertainment |
Wendys and Golden Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and Golden Entertainment
The main advantage of trading using opposite Wendys and Golden Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Golden Entertainment 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 Golden Entertainment will offset losses from the drop in Golden Entertainment's long position.| Wendys vs. Yum Brands | Wendys vs. Dominos Pizza Common | Wendys vs. Darden Restaurants | Wendys vs. Papa Johns International |
| Golden Entertainment vs. Red Rock Resorts | Golden Entertainment vs. Century Casinos | Golden Entertainment vs. Studio City International | Golden Entertainment vs. Ballys 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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