Correlation Between Wendys and Reborn Coffee

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

Diversification Opportunities for Wendys and Reborn Coffee

0.26

Correlation Coefficient

Wendys  Reborn Coffee

Modest diversification

The 3 months correlation between Wendys and Reborn is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Reborn Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reborn Coffee 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 Reborn Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reborn Coffee has no effect on the direction of Wendys i.e., Wendys and Reborn Coffee go up and down completely randomly.

Pair Corralation between Wendys and Reborn Coffee

Considering the 90-day investment horizon The Wendys Co is expected to under-perform the Reborn Coffee. But the stock apears to be less risky and, when comparing its historical volatility, The Wendys Co is 6.14 times less risky than Reborn Coffee. The stock trades about -0.03 of its potential returns per unit of risk. The Reborn Coffee is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  960.00  in Reborn Coffee on October 10, 2024 and sell it today you would lose (788.00) from holding Reborn Coffee or give up 82.08% of portfolio value over 90 days.

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

The Wendys Co  vs.  Reborn Coffee

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.

Reborn Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reborn Coffee 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 fundamental drivers 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.

Pair Trading with Wendys and Reborn Coffee

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

The idea behind The Wendys Co and Reborn Coffee 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.