Correlation Between Wendys and Brinker International

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

Diversification Opportunities for Wendys and Brinker International

-0.86

Correlation Coefficient

Wendys  Brinker International

Pay attention - limited upside

The 3 months correlation between Wendys and Brinker is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International 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 Brinker International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker International has no effect on the direction of Wendys i.e., Wendys and Brinker International go up and down completely randomly.

Pair Corralation between Wendys and Brinker International

Considering the 90-day investment horizon The Wendys Co is expected to under-perform the Brinker International. But the stock apears to be less risky and, when comparing its historical volatility, The Wendys Co is 1.71 times less risky than Brinker International. The stock trades about -0.59 of its potential returns per unit of risk. The Brinker International is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  13,309  in Brinker International on October 22, 2024 and sell it today you would earn a total of  1,103  from holding Brinker International or generate 8.29% return on investment over 90 days.

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

The Wendys Co  vs.  Brinker International

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

Brinker International

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Brinker International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wendys and Brinker International

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

The idea behind The Wendys Co and Brinker International 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.