Correlation Between Wingstop and Potbelly

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

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

Diversification Opportunities for Wingstop and Potbelly

-0.35

Correlation Coefficient

Wingstop  Potbelly

Very good diversification

The 3 months correlation between Wingstop and Potbelly is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Potbelly Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potbelly 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 Potbelly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potbelly has no effect on the direction of Wingstop i.e., Wingstop and Potbelly go up and down completely randomly.

Pair Corralation between Wingstop and Potbelly

Given the investment horizon of 90 days Wingstop is expected to under-perform the Potbelly. In addition to that, Wingstop is 1.18 times more volatile than Potbelly Co. It trades about -0.24 of its total potential returns per unit of risk. Potbelly Co is currently generating about -0.19 per unit of volatility. If you would invest  1,018  in Potbelly Co on October 6, 2024 and sell it today you would lose (81.00) from holding Potbelly Co or give up 7.96% of portfolio value over 90 days.

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

Wingstop  vs.  Potbelly Co

Wingstop

Risk-Adjusted Performance

0 of 100

Very Weak

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

Potbelly

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Potbelly Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Potbelly sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wingstop and Potbelly

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

The idea behind Wingstop and Potbelly 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 Commodity Directory module to find actively traded commodities issued by global exchanges.