Correlation Between Frontdoor and WW International

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

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

Diversification Opportunities for Frontdoor and WW International

0.37

Correlation Coefficient

Frontdoor  WW International

Weak diversification

The 3 months correlation between Frontdoor and WW International is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Frontdoor and WW International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW International and Frontdoor 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 Frontdoor 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 Frontdoor i.e., Frontdoor and WW International go up and down completely randomly.

Pair Corralation between Frontdoor and WW International

Given the investment horizon of 90 days Frontdoor is expected to generate 24.01 times less return on investment than WW International. But when comparing it to its historical volatility, Frontdoor is 4.61 times less risky than WW International. It trades about 0.07 of its potential returns per unit of risk. WW International is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  87.00  in WW International on September 19, 2024 and sell it today you would earn a total of  72.00  from holding WW International or generate 82.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Frontdoor  vs.  WW International

Frontdoor

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontdoor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Frontdoor reported solid returns over the last few months and may actually be approaching a breakup point.

WW International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WW International are ranked lower than 10 (%) 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 Frontdoor and WW International

The main advantage of trading using opposite Frontdoor and WW International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontdoor 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 Frontdoor 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.