Correlation Between Wingstop and Portillos

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

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

Diversification Opportunities for Wingstop and Portillos

-0.09

Correlation Coefficient

Wingstop  Portillos

Good diversification

The 3 months correlation between Wingstop and Portillos is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Portillos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portillos 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 Portillos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portillos has no effect on the direction of Wingstop i.e., Wingstop and Portillos go up and down completely randomly.

Pair Corralation between Wingstop and Portillos

Given the investment horizon of 90 days Wingstop is expected to generate 0.87 times more return on investment than Portillos. However, Wingstop is 1.15 times less risky than Portillos. It trades about -0.05 of its potential returns per unit of risk. Portillos is currently generating about -0.19 per unit of risk. If you would invest  23,449  in Wingstop on December 30, 2024 and sell it today you would lose (1,049) from holding Wingstop or give up 4.47% of portfolio value over 90 days.

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

Wingstop  vs.  Portillos

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.

Portillos

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Portillos are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Portillos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wingstop and Portillos

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

The idea behind Wingstop and Portillos 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.