Correlation Between Westrock Coffee and Wendys

Can any of the company-specific risk be diversified away by investing in both Westrock Coffee and Wendys 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 Westrock Coffee and Wendys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Westrock Coffee and The Wendys Co, you can compare the effects of market volatilities on Westrock Coffee and Wendys 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 Westrock Coffee with a short position of Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westrock Coffee and Wendys.

Diversification Opportunities for Westrock Coffee and Wendys

0.12

Correlation Coefficient

Westrock Coffee  Wendys

Average diversification

The 3 months correlation between Westrock and Wendys is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Westrock Coffee 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 Westrock Coffee are associated (or correlated) with Wendys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Wendys has no effect on the direction of Westrock Coffee i.e., Westrock Coffee and Wendys go up and down completely randomly.

Pair Corralation between Westrock Coffee and Wendys

Given the investment horizon of 90 days Westrock Coffee is expected to under-perform the Wendys. In addition to that, Westrock Coffee is 1.69 times more volatile than The Wendys Co. It trades about -0.05 of its total potential returns per unit of risk. The Wendys Co is currently generating about -0.02 per unit of volatility. 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

Westrock Coffee  vs.  The Wendys Co

Westrock Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westrock Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Westrock Coffee is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Westrock Coffee and Wendys

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

The idea behind Westrock Coffee and The Wendys Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.