Correlation Between Good Times and Wingstop

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

By analyzing existing cross correlation between Good Times Restaurants and Wingstop, you can compare the effects of market volatilities on Good Times and Wingstop 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 Good Times with a short position of Wingstop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Good Times and Wingstop.

Diversification Opportunities for Good Times and Wingstop

0.66

Correlation Coefficient

Good Times  Wingstop

Poor diversification

The 3 months correlation between Good and Wingstop is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop and Good Times 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 Good Times Restaurants are associated (or correlated) with Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of Good Times i.e., Good Times and Wingstop go up and down completely randomly.

Pair Corralation between Good Times and Wingstop

Given the investment horizon of 90 days Good Times is expected to generate 14.92 times less return on investment than Wingstop. But when comparing it to its historical volatility, Good Times Restaurants is 1.03 times less risky than Wingstop. It trades about 0.0 of its potential returns per unit of risk. Wingstop is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  16,507  in Wingstop on December 2, 2024 and sell it today you would earn a total of  6,971  from holding Wingstop or generate 42.23% return on investment over 90 days.

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

Good Times Restaurants  vs.  Wingstop

Good Times Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Wingstop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Good Times and Wingstop

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

The idea behind Good Times Restaurants and Wingstop 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.