Correlation Between Wingstop and Build A

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

By analyzing existing cross correlation between Wingstop and Build A Bear Workshop, you can compare the effects of market volatilities on Wingstop and Build A 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 Wingstop with a short position of Build A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wingstop and Build A.

Diversification Opportunities for Wingstop and Build A

0.53

Correlation Coefficient

Wingstop  Build A

Very weak diversification

The 3 months correlation between Wingstop and Build is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Build A Bear Workshop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build A Bear and Wingstop 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 Wingstop are associated (or correlated) with Build A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build A Bear has no effect on the direction of Wingstop i.e., Wingstop and Build A go up and down completely randomly.

Pair Corralation between Wingstop and Build A

Given the investment horizon of 90 days Wingstop is expected to generate 1.06 times more return on investment than Build A. However, Wingstop is 1.06 times more volatile than Build A Bear Workshop. It trades about -0.1 of its potential returns per unit of risk. Build A Bear Workshop is currently generating about -0.12 per unit of risk. If you would invest  28,680  in Wingstop on December 29, 2024 and sell it today you would lose (5,751) from holding Wingstop or give up 20.05% of portfolio value over 90 days.

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

Wingstop  vs.  Build A Bear Workshop

Wingstop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Build A Bear

Risk-Adjusted Performance

Very Weak

Over the last 90 days Build A Bear Workshop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Wingstop and Build A

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

The idea behind Wingstop and Build A Bear Workshop 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.