Correlation Between Wendys and Nathans Famous

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

Diversification Opportunities for Wendys and Nathans Famous

0.64

Correlation Coefficient

Wendys  Nathans Famous

Poor diversification

The 3 months correlation between Wendys and Nathans is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co and Nathans Famous in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nathans Famous 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 Nathans Famous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nathans Famous has no effect on the direction of Wendys i.e., Wendys and Nathans Famous go up and down completely randomly.

Pair Corralation between Wendys and Nathans Famous

Considering the 90-day investment horizon Wendys is expected to generate 11.46 times less return on investment than Nathans Famous. But when comparing it to its historical volatility, The Wendys Co is 1.06 times less risky than Nathans Famous. It trades about 0.01 of its potential returns per unit of risk. Nathans Famous is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,753  in Nathans Famous on September 13, 2024 and sell it today you would earn a total of  724.00  from holding Nathans Famous or generate 9.34% return on investment over 90 days.

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

The Wendys Co  vs.  Nathans Famous

The Wendys

Risk-Adjusted Performance

0 of 100

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.

Nathans Famous

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nathans Famous are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Nathans Famous may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wendys and Nathans Famous

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

The idea behind The Wendys Co and Nathans Famous 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.