Correlation Between Dennys Corp and Rave Restaurant
Can any of the company-specific risk be diversified away by investing in both Dennys Corp and Rave Restaurant 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 Dennys Corp and Rave Restaurant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dennys Corp and Rave Restaurant Group, you can compare the effects of market volatilities on Dennys Corp and Rave Restaurant 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 Dennys Corp with a short position of Rave Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dennys Corp and Rave Restaurant.
Diversification Opportunities for Dennys Corp and Rave Restaurant
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dennys and Rave is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dennys Corp and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant Group and Dennys Corp 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 Dennys Corp are associated (or correlated) with Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of Dennys Corp i.e., Dennys Corp and Rave Restaurant go up and down completely randomly.
Pair Corralation between Dennys Corp and Rave Restaurant
Given the investment horizon of 90 days Dennys Corp is expected to under-perform the Rave Restaurant. In addition to that, Dennys Corp is 1.04 times more volatile than Rave Restaurant Group. It trades about -0.06 of its total potential returns per unit of risk. Rave Restaurant Group is currently generating about 0.08 per unit of volatility. If you would invest 280.00 in Rave Restaurant Group on August 29, 2024 and sell it today you would earn a total of 12.00 from holding Rave Restaurant Group or generate 4.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Dennys Corp vs. Rave Restaurant Group
Performance |
Timeline |
Dennys Corp |
Rave Restaurant Group |
Dennys Corp and Rave Restaurant Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dennys Corp and Rave Restaurant
The main advantage of trading using opposite Dennys Corp and Rave Restaurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dennys Corp position performs unexpectedly, Rave Restaurant 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 Rave Restaurant will offset losses from the drop in Rave Restaurant's long position.Dennys Corp vs. Brinker International | Dennys Corp vs. Bloomin Brands | Dennys Corp vs. Jack In The | Dennys Corp vs. BJs Restaurants |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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