Correlation Between Wendys and PFIZER

Can any of the company-specific risk be diversified away by investing in both Wendys and PFIZER 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 PFIZER 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 PFIZER INC 44, you can compare the effects of market volatilities on Wendys and PFIZER 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 PFIZER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and PFIZER.

Diversification Opportunities for Wendys and PFIZER

-0.24

Correlation Coefficient

Wendys  PFIZER

Very good diversification

The 3 months correlation between Wendys and PFIZER is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and PFIZER INC 44 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER INC 44 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 PFIZER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PFIZER INC 44 has no effect on the direction of Wendys i.e., Wendys and PFIZER go up and down completely randomly.

Pair Corralation between Wendys and PFIZER

Considering the 90-day investment horizon The Wendys Co is expected to under-perform the PFIZER. But the stock apears to be less risky and, when comparing its historical volatility, The Wendys Co is 2.27 times less risky than PFIZER. The stock trades about -0.51 of its potential returns per unit of risk. The PFIZER INC 44 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,949  in PFIZER INC 44 on September 26, 2024 and sell it today you would earn a total of  137.00  from holding PFIZER INC 44 or generate 1.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

The Wendys Co  vs.  PFIZER INC 44

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.

PFIZER INC 44

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days PFIZER INC 44 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PFIZER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wendys and PFIZER

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

The idea behind The Wendys Co and PFIZER INC 44 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.