Correlation Between Wendys and Conifex Timber

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

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

Diversification Opportunities for Wendys and Conifex Timber

0.88

Correlation Coefficient

Wendys  Conifex Timber

Very poor diversification

The 3 months correlation between Wendys and Conifex is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Conifex Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conifex Timber and Wendys 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 The Wendys Co are associated (or correlated) with Conifex Timber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conifex Timber has no effect on the direction of Wendys i.e., Wendys and Conifex Timber go up and down completely randomly.

Pair Corralation between Wendys and Conifex Timber

Considering the 90-day investment horizon The Wendys Co is expected to generate 0.48 times more return on investment than Conifex Timber. However, The Wendys Co is 2.07 times less risky than Conifex Timber. It trades about -0.13 of its potential returns per unit of risk. Conifex Timber is currently generating about -0.19 per unit of risk. If you would invest  1,785  in The Wendys Co on December 3, 2024 and sell it today you would lose (235.00) from holding The Wendys Co or give up 13.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.83%
Values	Daily Returns

The Wendys Co  vs.  Conifex Timber

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

Conifex Timber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Conifex Timber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Wendys and Conifex Timber

The main advantage of trading using opposite Wendys and Conifex Timber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Conifex Timber 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 Conifex Timber will offset losses from the drop in Conifex Timber's long position.

The idea behind The Wendys Co and Conifex Timber 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.