Correlation Between Wingstop and Travel Leisure
Can any of the company-specific risk be diversified away by investing in both Wingstop and Travel Leisure 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 Travel Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wingstop and Travel Leisure Co, you can compare the effects of market volatilities on Wingstop and Travel Leisure 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 Travel Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wingstop and Travel Leisure.
Diversification Opportunities for Wingstop and Travel Leisure
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wingstop and Travel is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Travel Leisure Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travel Leisure 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 Travel Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travel Leisure has no effect on the direction of Wingstop i.e., Wingstop and Travel Leisure go up and down completely randomly.
Pair Corralation between Wingstop and Travel Leisure
Given the investment horizon of 90 days Wingstop is expected to generate 3.32 times less return on investment than Travel Leisure. In addition to that, Wingstop is 1.51 times more volatile than Travel Leisure Co. It trades about 0.03 of its total potential returns per unit of risk. Travel Leisure Co is currently generating about 0.17 per unit of volatility. If you would invest 4,811 in Travel Leisure Co on November 1, 2024 and sell it today you would earn a total of 744.50 from holding Travel Leisure Co or generate 15.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wingstop vs. Travel Leisure Co
Performance |
| Timeline |
| Wingstop |
| Travel Leisure |
Wingstop and Travel Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wingstop and Travel Leisure
The main advantage of trading using opposite Wingstop and Travel Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wingstop position performs unexpectedly, Travel Leisure 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 Travel Leisure will offset losses from the drop in Travel Leisure's long position.| Wingstop vs. Papa Johns International | Wingstop vs. Chipotle Mexican Grill | Wingstop vs. The Wendys Co | Wingstop vs. Dominos Pizza Common |
| Travel Leisure vs. Yatra Online | Travel Leisure vs. Despegar Corp | Travel Leisure vs. Lindblad Expeditions Holdings | Travel Leisure vs. Expedia Group |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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