Correlation Between Texas Roadhouse and Wendys

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

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

Diversification Opportunities for Texas Roadhouse and Wendys

0.13

Correlation Coefficient

Texas Roadhouse  Wendys

Average diversification

The 3 months correlation between Texas and Wendys is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Texas Roadhouse 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 Texas Roadhouse 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 Texas Roadhouse i.e., Texas Roadhouse and Wendys go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Wendys

Given the investment horizon of 90 days Texas Roadhouse is expected to under-perform the Wendys. In addition to that, Texas Roadhouse is 1.88 times more volatile than The Wendys Co. It trades about -0.32 of its total potential returns per unit of risk. The Wendys Co is currently generating about -0.57 per unit of volatility. If you would invest  1,828  in The Wendys Co on September 28, 2024 and sell it today you would lose (178.00) from holding The Wendys Co or give up 9.74% of portfolio value over 90 days.

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

Texas Roadhouse  vs.  The Wendys Co

Texas Roadhouse

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Texas Roadhouse is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

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 Texas Roadhouse and Wendys

The main advantage of trading using opposite Texas Roadhouse and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Roadhouse 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 Texas Roadhouse 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.