Correlation Between Wendys and First CommunityPFD

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

Diversification Opportunities for Wendys and First CommunityPFD

0.6

Correlation Coefficient

Wendys  First CommunityPFD

Poor diversification

The 3 months correlation between Wendys and First is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First CommunityPFD 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 First CommunityPFD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First CommunityPFD has no effect on the direction of Wendys i.e., Wendys and First CommunityPFD go up and down completely randomly.

Pair Corralation between Wendys and First CommunityPFD

Considering the 90-day investment horizon The Wendys Co is expected to under-perform the First CommunityPFD. In addition to that, Wendys is 8.53 times more volatile than First Community. It trades about -0.07 of its total potential returns per unit of risk. First Community is currently generating about -0.13 per unit of volatility. If you would invest  940.00  in First Community on December 28, 2024 and sell it today you would lose (15.00) from holding First Community or give up 1.6% of portfolio value over 90 days.

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

The Wendys Co  vs.  First Community

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

First CommunityPFD

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Community has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, First CommunityPFD is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Wendys and First CommunityPFD

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

The idea behind The Wendys Co and First Community 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..