Correlation Between HP and Wingstop
Can any of the company-specific risk be diversified away by investing in both HP 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 HP and Wingstop into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Wingstop, you can compare the effects of market volatilities on HP 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 HP with a short position of Wingstop. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Wingstop.
Diversification Opportunities for HP and Wingstop
Very weak diversification
The 3 months correlation between HP and Wingstop is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop and HP 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 HP Inc 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 HP i.e., HP and Wingstop go up and down completely randomly.
Pair Corralation between HP and Wingstop
Considering the 90-day investment horizon HP Inc is expected to under-perform the Wingstop. In addition to that, HP is 1.04 times more volatile than Wingstop. It trades about -0.09 of its total potential returns per unit of risk. Wingstop is currently generating about -0.05 per unit of volatility. If you would invest 31,525 in Wingstop on October 7, 2024 and sell it today you would lose (1,724) from holding Wingstop or give up 5.47% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
HP Inc vs. Wingstop
Performance |
Timeline |
HP Inc |
Wingstop |
HP and Wingstop Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HP and Wingstop
The main advantage of trading using opposite HP and Wingstop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc 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.Wingstop vs. Papa Johns International | Wingstop vs. Chipotle Mexican Grill | Wingstop vs. The Wendys Co | Wingstop vs. Dominos Pizza Common |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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