Correlation Between Wendys and Westrock Coffee
Can any of the company-specific risk be diversified away by investing in both Wendys and Westrock Coffee 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 Westrock Coffee 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 Westrock Coffee, you can compare the effects of market volatilities on Wendys and Westrock Coffee 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 Westrock Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Westrock Coffee.
Diversification Opportunities for Wendys and Westrock Coffee
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wendys and Westrock is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Wendys i.e., Wendys and Westrock Coffee go up and down completely randomly.
Pair Corralation between Wendys and Westrock Coffee
Considering the 90-day investment horizon The Wendys Co is expected to generate 0.95 times more return on investment than Westrock Coffee. However, The Wendys Co is 1.05 times less risky than Westrock Coffee. It trades about 0.14 of its potential returns per unit of risk. Westrock Coffee is currently generating about -0.27 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Wendys Co vs. Westrock Coffee
Performance |
| Timeline |
| The Wendys |
| Westrock Coffee |
Wendys and Westrock Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and Westrock Coffee
The main advantage of trading using opposite Wendys and Westrock Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Westrock Coffee 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 Westrock Coffee will offset losses from the drop in Westrock Coffee's long position.| Wendys vs. Yum Brands | Wendys vs. Dominos Pizza Common | Wendys vs. Darden Restaurants | Wendys vs. Papa Johns International |
| Westrock Coffee vs. Coffee Holding Co | Westrock Coffee vs. Bridgford Foods | Westrock Coffee vs. John B Sanfilippo | Westrock Coffee vs. Treehouse Foods |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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