Correlation Between Wendys and Verizon Communications

Can any of the company-specific risk be diversified away by investing in both Wendys and Verizon Communications 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 Verizon Communications 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 Verizon Communications, you can compare the effects of market volatilities on Wendys and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Verizon Communications.

Diversification Opportunities for Wendys and Verizon Communications

-0.18

Correlation Coefficient

Wendys  Verizon Communications

Good diversification

The 3 months correlation between Wendys and Verizon is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Wendys i.e., Wendys and Verizon Communications go up and down completely randomly.

Pair Corralation between Wendys and Verizon Communications

Considering the 90-day investment horizon The Wendys Co is expected to under-perform the Verizon Communications. In addition to that, Wendys is 1.29 times more volatile than Verizon Communications. It trades about -0.01 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.0 per unit of volatility. If you would invest  4,001  in Verizon Communications on February 23, 2024 and sell it today you would lose (22.00) from holding Verizon Communications or give up 0.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

The Wendys Co  vs.  Verizon Communications

The Wendys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Wendys Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Wendys is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wendys and Verizon Communications

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

The idea behind The Wendys Co and Verizon Communications 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.