Correlation Between Cracker Barrel and Wendys

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

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

Diversification Opportunities for Cracker Barrel and Wendys

0.79

Correlation Coefficient

Cracker Barrel  Wendys

Poor diversification

The 3 months correlation between Cracker and Wendys is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cracker Barrel Old and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Cracker Barrel 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 Cracker Barrel Old 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 Cracker Barrel i.e., Cracker Barrel and Wendys go up and down completely randomly.

Pair Corralation between Cracker Barrel and Wendys

Given the investment horizon of 90 days Cracker Barrel Old is expected to under-perform the Wendys. In addition to that, Cracker Barrel is 1.8 times more volatile than The Wendys Co. It trades about -0.03 of its total potential returns per unit of risk. The Wendys Co is currently generating about -0.01 per unit of volatility. If you would invest  2,108  in The Wendys Co on August 25, 2024 and sell it today you would lose (310.00) from holding The Wendys Co or give up 14.71% of portfolio value over 90 days.

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

Cracker Barrel Old  vs.  The Wendys Co

Cracker Barrel Old

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cracker Barrel Old are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Cracker Barrel disclosed solid returns over the last few months and may actually be approaching a breakup point.

The Wendys

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Wendys Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Wendys may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Cracker Barrel and Wendys

The main advantage of trading using opposite Cracker Barrel and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cracker Barrel 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 Cracker Barrel Old 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.