Correlation Between Wendys and Stepan
Can any of the company-specific risk be diversified away by investing in both Wendys and Stepan 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 Stepan 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 Stepan Company, you can compare the effects of market volatilities on Wendys and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Stepan.
Diversification Opportunities for Wendys and Stepan
Average diversification
The 3 months correlation between Wendys and Stepan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Wendys i.e., Wendys and Stepan go up and down completely randomly.
Pair Corralation between Wendys and Stepan
Considering the 90-day investment horizon The Wendys Co is expected to generate 0.81 times more return on investment than Stepan. However, The Wendys Co is 1.24 times less risky than Stepan. It trades about -0.02 of its potential returns per unit of risk. Stepan Company is currently generating about -0.04 per unit of risk. If you would invest 2,042 in The Wendys Co on September 26, 2024 and sell it today you would lose (379.00) from holding The Wendys Co or give up 18.56% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
The Wendys Co vs. Stepan Company
Performance |
Timeline |
The Wendys |
Stepan Company |
Wendys and Stepan Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Wendys and Stepan
The main advantage of trading using opposite Wendys and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.Wendys vs. Yum Brands | Wendys vs. Dominos Pizza | Wendys vs. Darden Restaurants | Wendys vs. Papa Johns International |
Check out your portfolio center.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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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