Correlation Between Park Hotels and Wendys

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

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

Diversification Opportunities for Park Hotels and Wendys

-0.32

Correlation Coefficient

Park Hotels  Wendys

Very good diversification

The 3 months correlation between Park and Wendys is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Park Hotels 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 Park Hotels Resorts 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 Park Hotels i.e., Park Hotels and Wendys go up and down completely randomly.

Pair Corralation between Park Hotels and Wendys

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 2.04 times more return on investment than Wendys. However, Park Hotels is 2.04 times more volatile than The Wendys Co. It trades about -0.17 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.65 per unit of risk. If you would invest  1,486  in Park Hotels Resorts on October 12, 2024 and sell it today you would lose (110.00) from holding Park Hotels Resorts or give up 7.4% of portfolio value over 90 days.

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

Park Hotels Resorts  vs.  The Wendys Co

Park Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Park Hotels is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional 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 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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Park Hotels and Wendys

The main advantage of trading using opposite Park Hotels and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Hotels 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 Park Hotels Resorts 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.