Correlation Between Wendys and AMAZON

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Can any of the company-specific risk be diversified away by investing in both Wendys and AMAZON 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 AMAZON 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 AMAZON INC 52, you can compare the effects of market volatilities on Wendys and AMAZON 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 AMAZON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and AMAZON.

Diversification Opportunities for Wendys and AMAZON

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Wendys and AMAZON is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and AMAZON INC 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMAZON INC 52 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 AMAZON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMAZON INC 52 has no effect on the direction of Wendys i.e., Wendys and AMAZON go up and down completely randomly.

Pair Corralation between Wendys and AMAZON

Considering the 90-day investment horizon The Wendys Co is expected to under-perform the AMAZON. In addition to that, Wendys is 3.72 times more volatile than AMAZON INC 52. It trades about -0.2 of its total potential returns per unit of risk. AMAZON INC 52 is currently generating about -0.03 per unit of volatility. If you would invest  10,064  in AMAZON INC 52 on September 14, 2024 and sell it today you would lose (23.00) from holding AMAZON INC 52 or give up 0.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

The Wendys Co  vs.  AMAZON INC 52

 Performance 
       Timeline  
The Wendys 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days The Wendys Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Wendys is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
AMAZON INC 52 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AMAZON INC 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMAZON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wendys and AMAZON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wendys and AMAZON

The main advantage of trading using opposite Wendys and AMAZON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, AMAZON 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 AMAZON will offset losses from the drop in AMAZON's long position.
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The idea behind The Wendys Co and AMAZON INC 52 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.
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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