Correlation Between Wendys and United Parks
Can any of the company-specific risk be diversified away by investing in both Wendys and United Parks 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 United Parks 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 United Parks Resorts, you can compare the effects of market volatilities on Wendys and United Parks 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 United Parks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and United Parks.
Diversification Opportunities for Wendys and United Parks
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wendys and United is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks Resorts 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 United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of Wendys i.e., Wendys and United Parks go up and down completely randomly.
Pair Corralation between Wendys and United Parks
Considering the 90-day investment horizon The Wendys Co is expected to generate 1.07 times more return on investment than United Parks. However, Wendys is 1.07 times more volatile than United Parks Resorts. It trades about 0.14 of its potential returns per unit of risk. United Parks Resorts is currently generating about 0.04 per unit of risk. If you would invest 1,453 in The Wendys Co on November 28, 2024 and sell it today you would earn a total of 97.00 from holding The Wendys Co or generate 6.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Wendys Co vs. United Parks Resorts
Performance |
| Timeline |
| The Wendys |
| United Parks Resorts |
Wendys and United Parks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and United Parks
The main advantage of trading using opposite Wendys and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, United Parks 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 United Parks will offset losses from the drop in United Parks' long position.| Wendys vs. Yum Brands | Wendys vs. Dominos Pizza Common | Wendys vs. Darden Restaurants | Wendys vs. Papa Johns International |
| United Parks vs. Chipotle Mexican Grill | United Parks vs. Dominos Pizza Common | United Parks vs. Yum Brands | United Parks vs. The Wendys Co |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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