Correlation Between Wendys and Flexible Solutions

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

Diversification Opportunities for Wendys and Flexible Solutions

0.45

Correlation Coefficient

Wendys  Flexible Solutions

Very weak diversification

The 3 months correlation between Wendys and Flexible is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Wendys i.e., Wendys and Flexible Solutions go up and down completely randomly.

Pair Corralation between Wendys and Flexible Solutions

Considering the 90-day investment horizon The Wendys Co is expected to under-perform the Flexible Solutions. But the stock apears to be less risky and, when comparing its historical volatility, The Wendys Co is 2.31 times less risky than Flexible Solutions. The stock trades about -0.02 of its potential returns per unit of risk. The Flexible Solutions International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  298.00  in Flexible Solutions International on September 26, 2024 and sell it today you would earn a total of  58.00  from holding Flexible Solutions International or generate 19.46% return on investment over 90 days.

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

The Wendys Co  vs.  Flexible Solutions Internation

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 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.

Flexible Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flexible Solutions International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Flexible Solutions is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Wendys and Flexible Solutions

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

The idea behind The Wendys Co and Flexible Solutions 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.