Correlation Between Wingstop and Potbelly
Can any of the company-specific risk be diversified away by investing in both Wingstop and Potbelly 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 Potbelly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wingstop and Potbelly Co, you can compare the effects of market volatilities on Wingstop and Potbelly 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 Potbelly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wingstop and Potbelly.
Diversification Opportunities for Wingstop and Potbelly
Very good diversification
The 3 months correlation between Wingstop and Potbelly is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Potbelly Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potbelly 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 Potbelly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potbelly has no effect on the direction of Wingstop i.e., Wingstop and Potbelly go up and down completely randomly.
Pair Corralation between Wingstop and Potbelly
Given the investment horizon of 90 days Wingstop is expected to under-perform the Potbelly. But the stock apears to be less risky and, when comparing its historical volatility, Wingstop is 1.04 times less risky than Potbelly. The stock trades about -0.02 of its potential returns per unit of risk. The Potbelly Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 880.00 in Potbelly Co on August 28, 2024 and sell it today you would earn a total of 141.00 from holding Potbelly Co or generate 16.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wingstop vs. Potbelly Co
Performance |
| Timeline |
| Wingstop |
| Potbelly |
Wingstop and Potbelly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wingstop and Potbelly
The main advantage of trading using opposite Wingstop and Potbelly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wingstop position performs unexpectedly, Potbelly 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 Potbelly will offset losses from the drop in Potbelly's long position.| Wingstop vs. Papa Johns International | Wingstop vs. Chipotle Mexican Grill | Wingstop vs. The Wendys Co | Wingstop vs. Dominos Pizza |
| Potbelly vs. FAT Brands | Potbelly vs. BJs Restaurants | Potbelly vs. One Group Hospitality | Potbelly vs. El Pollo Loco |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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