Correlation Between Wendys and Dalata Hotel

Can any of the company-specific risk be diversified away by investing in both Wendys and Dalata Hotel 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 Dalata Hotel 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 Dalata Hotel Group, you can compare the effects of market volatilities on Wendys and Dalata Hotel 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 Dalata Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Dalata Hotel.

Diversification Opportunities for Wendys and Dalata Hotel

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Correlation Coefficient

Wendys  Dalata Hotel

Pay attention - limited upside

The 3 months correlation between Wendys and Dalata is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Dalata Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalata Hotel Group 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 Dalata Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalata Hotel Group has no effect on the direction of Wendys i.e., Wendys and Dalata Hotel go up and down completely randomly.

Pair Corralation between Wendys and Dalata Hotel

Considering the 90-day investment horizon The Wendys Co is expected to under-perform the Dalata Hotel. But the stock apears to be less risky and, when comparing its historical volatility, The Wendys Co is 1.44 times less risky than Dalata Hotel. The stock trades about -0.02 of its potential returns per unit of risk. The Dalata Hotel Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  336.00  in Dalata Hotel Group on September 23, 2024 and sell it today you would earn a total of  152.00  from holding Dalata Hotel Group or generate 45.24% return on investment over 90 days.

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

The Wendys Co  vs.  Dalata Hotel Group

The Wendys

Risk-Adjusted Performance

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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.

Dalata Hotel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dalata Hotel Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dalata Hotel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wendys and Dalata Hotel

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

The idea behind The Wendys Co and Dalata Hotel Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.