Correlation Between Wingstop and WW International

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

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

Diversification Opportunities for Wingstop and WW International

-0.28

Correlation Coefficient

Wingstop  WW International

Very good diversification

The 3 months correlation between Wingstop and WW International is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and WW International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW International 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 WW International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WW International has no effect on the direction of Wingstop i.e., Wingstop and WW International go up and down completely randomly.

Pair Corralation between Wingstop and WW International

Given the investment horizon of 90 days Wingstop is expected to under-perform the WW International. But the stock apears to be less risky and, when comparing its historical volatility, Wingstop is 3.87 times less risky than WW International. The stock trades about -0.29 of its potential returns per unit of risk. The WW International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  125.00  in WW International on September 27, 2024 and sell it today you would lose (6.00) from holding WW International or give up 4.8% of portfolio value over 90 days.

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

Wingstop  vs.  WW International

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

WW International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WW International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, WW International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wingstop and WW International

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

The idea behind Wingstop and WW International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.