Correlation Between Wendys and Nike
Can any of the company-specific risk be diversified away by investing in both Wendys and Nike 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 Nike 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 Nike Inc, you can compare the effects of market volatilities on Wendys and Nike 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 Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Nike.
Diversification Opportunities for Wendys and Nike
Very good diversification
The 3 months correlation between Wendys and Nike is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Wendys i.e., Wendys and Nike go up and down completely randomly.
Pair Corralation between Wendys and Nike
Considering the 90-day investment horizon The Wendys Co is expected to under-perform the Nike. In addition to that, Wendys is 1.45 times more volatile than Nike Inc. It trades about -0.16 of its total potential returns per unit of risk. Nike Inc is currently generating about -0.05 per unit of volatility. If you would invest 7,885 in Nike Inc on August 26, 2024 and sell it today you would lose (145.00) from holding Nike Inc or give up 1.84% 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. Nike Inc
Performance |
| Timeline |
| The Wendys |
| Nike Inc |
Wendys and Nike Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and Nike
The main advantage of trading using opposite Wendys and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Nike 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 Nike will offset losses from the drop in Nike's long position.The idea behind The Wendys Co and Nike Inc 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.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |