Correlation Between Wingstop and Dutch Bros
Can any of the company-specific risk be diversified away by investing in both Wingstop and Dutch Bros 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 Wingstop and Dutch Bros into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wingstop and Dutch Bros, you can compare the effects of market volatilities on Wingstop and Dutch Bros 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 Wingstop with a short position of Dutch Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wingstop and Dutch Bros.
Diversification Opportunities for Wingstop and Dutch Bros
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Wingstop and Dutch is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Dutch Bros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dutch Bros and Wingstop 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 Wingstop are associated (or correlated) with Dutch Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dutch Bros has no effect on the direction of Wingstop i.e., Wingstop and Dutch Bros go up and down completely randomly.
Pair Corralation between Wingstop and Dutch Bros
Given the investment horizon of 90 days Wingstop is expected to generate 0.73 times more return on investment than Dutch Bros. However, Wingstop is 1.36 times less risky than Dutch Bros. It trades about 0.1 of its potential returns per unit of risk. Dutch Bros is currently generating about 0.06 per unit of risk. If you would invest 16,684 in Wingstop on August 26, 2024 and sell it today you would earn a total of 17,076 from holding Wingstop or generate 102.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wingstop vs. Dutch Bros
Performance |
| Timeline |
| Wingstop |
| Dutch Bros |
Wingstop and Dutch Bros Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wingstop and Dutch Bros
The main advantage of trading using opposite Wingstop and Dutch Bros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wingstop position performs unexpectedly, Dutch Bros 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 Dutch Bros will offset losses from the drop in Dutch Bros' long position.The idea behind Wingstop and Dutch Bros 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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