Correlation Between E Home and Wendys

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

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

Diversification Opportunities for E Home and Wendys

0.36

Correlation Coefficient

E Home  Wendys

Weak diversification

The 3 months correlation between EJH and Wendys is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and E Home 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 E Home Household Service 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 E Home i.e., E Home and Wendys go up and down completely randomly.

Pair Corralation between E Home and Wendys

Considering the 90-day investment horizon E Home Household Service is expected to under-perform the Wendys. In addition to that, E Home is 7.23 times more volatile than The Wendys Co. It trades about -0.05 of its total potential returns per unit of risk. The Wendys Co is currently generating about -0.02 per unit of volatility. If you would invest  1,859  in The Wendys Co on December 1, 2024 and sell it today you would lose (309.00) from holding The Wendys Co or give up 16.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

E Home Household Service  vs.  The Wendys Co

E Home Household

Risk-Adjusted Performance

Very Weak

Over the last 90 days E Home Household Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking indicators, E Home is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

The Wendys

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with E Home and Wendys

The main advantage of trading using opposite E Home and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Home 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 E Home Household Service 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.