Correlation Between Wingstop and OReilly Automotive

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

By analyzing existing cross correlation between Wingstop and OReilly Automotive, you can compare the effects of market volatilities on Wingstop and OReilly Automotive 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 OReilly Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wingstop and OReilly Automotive.

Diversification Opportunities for Wingstop and OReilly Automotive

-0.53

Correlation Coefficient

Wingstop  OReilly Automotive

Excellent diversification

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

Pair Corralation between Wingstop and OReilly Automotive

Given the investment horizon of 90 days Wingstop is expected to under-perform the OReilly Automotive. In addition to that, Wingstop is 2.55 times more volatile than OReilly Automotive. It trades about -0.11 of its total potential returns per unit of risk. OReilly Automotive is currently generating about 0.24 per unit of volatility. If you would invest  117,992  in OReilly Automotive on December 30, 2024 and sell it today you would earn a total of  22,863  from holding OReilly Automotive or generate 19.38% return on investment over 90 days.

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

Wingstop  vs.  OReilly Automotive

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.

OReilly Automotive

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, OReilly Automotive showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wingstop and OReilly Automotive

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

The idea behind Wingstop and OReilly Automotive 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.