Correlation Between TH International and Wendys

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

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

Diversification Opportunities for TH International and Wendys

-0.1

Correlation Coefficient

TH International  Wendys

Good diversification

The 3 months correlation between THCH and Wendys is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding TH International Limited and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and TH International 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 TH International Limited 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 TH International i.e., TH International and Wendys go up and down completely randomly.

Pair Corralation between TH International and Wendys

Given the investment horizon of 90 days TH International Limited is expected to generate 1.24 times more return on investment than Wendys. However, TH International is 1.24 times more volatile than The Wendys Co. It trades about 0.14 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.39 per unit of risk. If you would invest  106.00  in TH International Limited on March 2, 2024 and sell it today you would earn a total of  6.00  from holding TH International Limited or generate 5.66% return on investment over 90 days.

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

TH International Limited  vs.  The Wendys Co

TH International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TH International Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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

Pair Trading with TH International and Wendys

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