Correlation Between Merck and Wendys
Can any of the company-specific risk be diversified away by investing in both Merck 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 Merck and Wendys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and The Wendys Co, you can compare the effects of market volatilities on Merck 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 Merck with a short position of Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Wendys.
Diversification Opportunities for Merck and Wendys
Almost no diversification
The 3 months correlation between Merck and Wendys is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Merck 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 Merck Company 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 Merck i.e., Merck and Wendys go up and down completely randomly.
Pair Corralation between Merck and Wendys
Considering the 90-day investment horizon Merck Company is expected to generate 1.1 times more return on investment than Wendys. However, Merck is 1.1 times more volatile than The Wendys Co. It trades about 0.05 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.05 per unit of risk. If you would invest 7,765 in Merck Company on March 9, 2025 and sell it today you would earn a total of 132.00 from holding Merck Company or generate 1.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. The Wendys Co
Performance |
| Timeline |
| Merck Company |
| The Wendys |
Merck and Wendys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Wendys
The main advantage of trading using opposite Merck and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck 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 Merck Company 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.| Wendys vs. Yum Brands | Wendys vs. Dominos Pizza Common | Wendys vs. Darden Restaurants | Wendys vs. Papa Johns International |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Transaction History View history of all your transactions and understand their impact on performance |