Correlation Between Wendys and Starbucks
Can any of the company-specific risk be diversified away by investing in both Wendys and Starbucks 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 Wendys and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Wendys Co and Starbucks, you can compare the effects of market volatilities on Wendys and Starbucks 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 Wendys with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Starbucks.
Diversification Opportunities for Wendys and Starbucks
Good diversification
The 3 months correlation between Wendys and Starbucks is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Wendys 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 The Wendys Co are associated (or correlated) with Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Wendys i.e., Wendys and Starbucks go up and down completely randomly.
Pair Corralation between Wendys and Starbucks
Considering the 90-day investment horizon The Wendys Co is expected to generate 1.19 times more return on investment than Starbucks. However, Wendys is 1.19 times more volatile than Starbucks. It trades about 0.03 of its potential returns per unit of risk. Starbucks is currently generating about -0.08 per unit of risk. If you would invest 1,871 in The Wendys Co on January 20, 2024 and sell it today you would earn a total of 29.00 from holding The Wendys Co or generate 1.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Wendys Co vs. Starbucks
Performance |
| Timeline |
| The Wendys |
| Starbucks |
Wendys and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and Starbucks
The main advantage of trading using opposite Wendys and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' long position.| Wendys vs. Yum Brands | Wendys vs. Dominos Pizza | Wendys vs. Darden Restaurants | Wendys vs. Papa Johns International |
| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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