Correlation Between Wingstop and HR Block
Can any of the company-specific risk be diversified away by investing in both Wingstop and HR Block 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 HR Block into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wingstop and HR Block, you can compare the effects of market volatilities on Wingstop and HR Block 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 HR Block. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wingstop and HR Block.
Diversification Opportunities for Wingstop and HR Block
Poor diversification
The 3 months correlation between Wingstop and HRB is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and HR Block in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HR Block 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 HR Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HR Block has no effect on the direction of Wingstop i.e., Wingstop and HR Block go up and down completely randomly.
Pair Corralation between Wingstop and HR Block
Given the investment horizon of 90 days Wingstop is expected to generate 1.4 times more return on investment than HR Block. However, Wingstop is 1.4 times more volatile than HR Block. It trades about 0.08 of its potential returns per unit of risk. HR Block is currently generating about 0.06 per unit of risk. If you would invest 15,195 in Wingstop on August 30, 2024 and sell it today you would earn a total of 17,932 from holding Wingstop or generate 118.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wingstop vs. HR Block
Performance |
| Timeline |
| Wingstop |
| HR Block |
Wingstop and HR Block Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wingstop and HR Block
The main advantage of trading using opposite Wingstop and HR Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wingstop position performs unexpectedly, HR Block 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 HR Block will offset losses from the drop in HR Block's long position.The idea behind Wingstop and HR Block 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.| HR Block vs. Bright Horizons Family | HR Block vs. Service International | HR Block vs. Carriage Services | HR Block vs. Mister Car Wash |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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