Correlation Between Acme United and Wendys

Can any of the company-specific risk be diversified away by investing in both Acme United and Wendys 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 Acme United and Wendys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Acme United and The Wendys Co, you can compare the effects of market volatilities on Acme United and Wendys 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 Acme United with a short position of Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acme United and Wendys.

Diversification Opportunities for Acme United and Wendys

-0.06

Correlation Coefficient

Acme United  Wendys

Good diversification

The 3 months correlation between Acme and Wendys is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Acme United and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Acme United 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 Acme United are associated (or correlated) with Wendys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Wendys has no effect on the direction of Acme United i.e., Acme United and Wendys go up and down completely randomly.

Pair Corralation between Acme United and Wendys

Considering the 90-day investment horizon Acme United is expected to generate 1.14 times more return on investment than Wendys. However, Acme United is 1.14 times more volatile than The Wendys Co. It trades about -0.07 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.16 per unit of risk. If you would invest  4,060  in Acme United on September 23, 2024 and sell it today you would lose (271.00) from holding Acme United or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Acme United  vs.  The Wendys Co

Acme United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acme United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

The Wendys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Wendys Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Wendys is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Acme United and Wendys

The main advantage of trading using opposite Acme United and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acme United position performs unexpectedly, Wendys 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 Wendys will offset losses from the drop in Wendys' long position.

The idea behind Acme United and The Wendys Co 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.