Correlation Between Wendys and Trupanion
Can any of the company-specific risk be diversified away by investing in both Wendys and Trupanion 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 Trupanion 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 Trupanion, you can compare the effects of market volatilities on Wendys and Trupanion 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 Trupanion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Trupanion.
Diversification Opportunities for Wendys and Trupanion
Poor diversification
The 3 months correlation between Wendys and Trupanion is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Trupanion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trupanion 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 Trupanion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trupanion has no effect on the direction of Wendys i.e., Wendys and Trupanion go up and down completely randomly.
Pair Corralation between Wendys and Trupanion
Considering the 90-day investment horizon The Wendys Co is expected to under-perform the Trupanion. But the stock apears to be less risky and, when comparing its historical volatility, The Wendys Co is 3.4 times less risky than Trupanion. The stock trades about -0.01 of its potential returns per unit of risk. The Trupanion is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,246 in Trupanion on August 30, 2024 and sell it today you would earn a total of 104.00 from holding Trupanion or generate 1.98% 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. Trupanion
Performance |
| Timeline |
| The Wendys |
| Trupanion |
Wendys and Trupanion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and Trupanion
The main advantage of trading using opposite Wendys and Trupanion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Trupanion 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 Trupanion will offset losses from the drop in Trupanion's long position.The idea behind The Wendys Co and Trupanion 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.| Trupanion vs. AMERISAFE | Trupanion vs. Enact Holdings | Trupanion vs. Essent Group | Trupanion vs. Radian Group |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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