Correlation Between EDVLN and Wendys

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

By analyzing existing cross correlation between EDVLN 5 14 OCT 26 and The Wendys Co, you can compare the effects of market volatilities on EDVLN 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 EDVLN with a short position of Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDVLN and Wendys.

Diversification Opportunities for EDVLN and Wendys

0.64

Correlation Coefficient

EDVLN  Wendys

Poor diversification

The 3 months correlation between EDVLN and Wendys is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding EDVLN 5 14 OCT 26 and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and EDVLN 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 EDVLN 5 14 OCT 26 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 EDVLN i.e., EDVLN and Wendys go up and down completely randomly.

Pair Corralation between EDVLN and Wendys

Assuming the 90 days trading horizon EDVLN 5 14 OCT 26 is expected to generate 0.35 times more return on investment than Wendys. However, EDVLN 5 14 OCT 26 is 2.89 times less risky than Wendys. It trades about 0.14 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.24 per unit of risk. If you would invest  9,696  in EDVLN 5 14 OCT 26 on September 5, 2024 and sell it today you would earn a total of  79.00  from holding EDVLN 5 14 OCT 26 or generate 0.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	47.62%
Values	Daily Returns

EDVLN 5 14 OCT 26  vs.  The Wendys Co

EDVLN 5 14

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EDVLN 5 14 OCT 26 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, EDVLN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

The Wendys

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Wendys Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Wendys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EDVLN and Wendys

The main advantage of trading using opposite EDVLN and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDVLN 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 EDVLN 5 14 OCT 26 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.