Correlation Between Wendys and United Parks

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

Diversification Opportunities for Wendys and United Parks

0.8

Correlation Coefficient

Wendys  United Parks

Very poor diversification

The 3 months correlation between Wendys and United is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks Resorts 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 United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of Wendys i.e., Wendys and United Parks go up and down completely randomly.

Pair Corralation between Wendys and United Parks

Considering the 90-day investment horizon The Wendys Co is expected to generate 0.79 times more return on investment than United Parks. However, The Wendys Co is 1.26 times less risky than United Parks. It trades about -0.14 of its potential returns per unit of risk. United Parks Resorts is currently generating about -0.13 per unit of risk. If you would invest  1,806  in The Wendys Co on December 1, 2024 and sell it today you would lose (256.00) from holding The Wendys Co or give up 14.17% of portfolio value over 90 days.

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

The Wendys Co  vs.  United Parks Resorts

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.

United Parks Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Parks Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Wendys and United Parks

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

The idea behind The Wendys Co and United Parks Resorts 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.