Correlation Between Wingstop and Smart Share

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

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

Diversification Opportunities for Wingstop and Smart Share

-0.21

Correlation Coefficient

Wingstop  Smart Share

Very good diversification

The 3 months correlation between Wingstop and Smart is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Smart Share Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Share Global and Wingstop 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 Wingstop are associated (or correlated) with Smart Share. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Share Global has no effect on the direction of Wingstop i.e., Wingstop and Smart Share go up and down completely randomly.

Pair Corralation between Wingstop and Smart Share

Given the investment horizon of 90 days Wingstop is expected to under-perform the Smart Share. But the stock apears to be less risky and, when comparing its historical volatility, Wingstop is 1.51 times less risky than Smart Share. The stock trades about -0.05 of its potential returns per unit of risk. The Smart Share Global is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Smart Share Global on August 20, 2024 and sell it today you would lose (3.00) from holding Smart Share Global or give up 4.11% of portfolio value over 90 days.

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

Wingstop  vs.  Smart Share Global

Wingstop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Smart Share Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart Share Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Smart Share is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Wingstop and Smart Share

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

The idea behind Wingstop and Smart Share Global 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.