Correlation Between BJs Restaurants and Wendys

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

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

Diversification Opportunities for BJs Restaurants and Wendys

-0.39

Correlation Coefficient

BJs Restaurants  Wendys

Very good diversification

The 3 months correlation between BJs and Wendys is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and BJs Restaurants 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 BJs Restaurants are associated (or correlated) with Wendys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Wendys has no effect on the direction of BJs Restaurants i.e., BJs Restaurants and Wendys go up and down completely randomly.

Pair Corralation between BJs Restaurants and Wendys

Given the investment horizon of 90 days BJs Restaurants is expected to under-perform the Wendys. In addition to that, BJs Restaurants is 1.98 times more volatile than The Wendys Co. It trades about -0.02 of its total potential returns per unit of risk. The Wendys Co is currently generating about 0.34 per unit of volatility. If you would invest  1,857  in The Wendys Co on February 6, 2024 and sell it today you would earn a total of  136.00  from holding The Wendys Co or generate 7.32% return on investment over 90 days.

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

BJs Restaurants  vs.  The Wendys Co

BJs Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BJs Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, BJs Restaurants is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

The Wendys

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Wendys Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Wendys may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with BJs Restaurants and Wendys

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

The idea behind BJs Restaurants and The Wendys Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.