Correlation Between Skechers USA and Wendys

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

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

Diversification Opportunities for Skechers USA and Wendys

-0.44

Correlation Coefficient

Skechers USA  Wendys

Very good diversification

The 3 months correlation between Skechers and Wendys is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Skechers USA 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 Skechers USA 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 Skechers USA i.e., Skechers USA and Wendys go up and down completely randomly.

Pair Corralation between Skechers USA and Wendys

Considering the 90-day investment horizon Skechers USA is expected to generate 1.59 times more return on investment than Wendys. However, Skechers USA is 1.59 times more volatile than The Wendys Co. It trades about -0.01 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.13 per unit of risk. If you would invest  6,382  in Skechers USA on November 28, 2024 and sell it today you would lose (200.00) from holding Skechers USA or give up 3.13% of portfolio value over 90 days.

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

Skechers USA  vs.  The Wendys Co

Skechers USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Skechers USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Skechers USA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Skechers USA and Wendys

The main advantage of trading using opposite Skechers USA and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skechers USA 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 Skechers USA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.