Correlation Between Boyd Gaming and Wendys

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

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

Diversification Opportunities for Boyd Gaming and Wendys

-0.04

Correlation Coefficient

Boyd Gaming  Wendys

Good diversification

The 3 months correlation between Boyd and Wendys is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Boyd Gaming 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 Boyd Gaming 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 Boyd Gaming i.e., Boyd Gaming and Wendys go up and down completely randomly.

Pair Corralation between Boyd Gaming and Wendys

Considering the 90-day investment horizon Boyd Gaming is expected to generate 1.09 times more return on investment than Wendys. However, Boyd Gaming is 1.09 times more volatile than The Wendys Co. It trades about -0.04 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.25 per unit of risk. If you would invest  7,217  in Boyd Gaming on September 23, 2024 and sell it today you would lose (97.00) from holding Boyd Gaming or give up 1.34% of portfolio value over 90 days.

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

Boyd Gaming  vs.  The Wendys Co

Boyd Gaming

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Gaming are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Boyd Gaming may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Boyd Gaming and Wendys

The main advantage of trading using opposite Boyd Gaming and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boyd Gaming 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 Boyd Gaming 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.