Correlation Between Wendys and Air Products

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

Diversification Opportunities for Wendys and Air Products

0.43

Correlation Coefficient

Wendys  Air Products

Very weak diversification

The 3 months correlation between Wendys and Air is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Wendys i.e., Wendys and Air Products go up and down completely randomly.

Pair Corralation between Wendys and Air Products

Considering the 90-day investment horizon The Wendys Co is expected to generate 1.21 times more return on investment than Air Products. However, Wendys is 1.21 times more volatile than Air Products and. It trades about -0.28 of its potential returns per unit of risk. Air Products and is currently generating about -0.52 per unit of risk. If you would invest  1,786  in The Wendys Co on September 22, 2024 and sell it today you would lose (121.00) from holding The Wendys Co or give up 6.77% of portfolio value over 90 days.

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

The Wendys Co  vs.  Air Products and

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 recent stock price disarray, may contribute to short-term losses for the investors.

Air Products

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Air Products is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Wendys and Air Products

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

The idea behind The Wendys Co and Air Products and 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.