Correlation Between Papaya Growth and Wendys

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

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

Diversification Opportunities for Papaya Growth and Wendys

-0.33

Correlation Coefficient

Papaya Growth  Wendys

Very good diversification

The 3 months correlation between Papaya and Wendys is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Papaya Growth Opportunity and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Papaya Growth 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 Papaya Growth Opportunity 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 Papaya Growth i.e., Papaya Growth and Wendys go up and down completely randomly.

Pair Corralation between Papaya Growth and Wendys

Assuming the 90 days horizon Papaya Growth Opportunity is expected to under-perform the Wendys. But the stock apears to be less risky and, when comparing its historical volatility, Papaya Growth Opportunity is 1.67 times less risky than Wendys. The stock trades about -0.02 of its potential returns per unit of risk. The The Wendys Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,632  in The Wendys Co on September 24, 2024 and sell it today you would earn a total of  33.00  from holding The Wendys Co or generate 2.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Papaya Growth Opportunity  vs.  The Wendys Co

Papaya Growth Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private 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 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 Papaya Growth and Wendys

The main advantage of trading using opposite Papaya Growth and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Papaya Growth 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 Papaya Growth Opportunity 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.