Correlation Between Dine Brands and Starbucks
Can any of the company-specific risk be diversified away by investing in both Dine Brands and Starbucks 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 Dine Brands and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dine Brands Global and Starbucks, you can compare the effects of market volatilities on Dine Brands and Starbucks 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 Dine Brands with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dine Brands and Starbucks.
Diversification Opportunities for Dine Brands and Starbucks
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dine and Starbucks is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dine Brands Global and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Dine Brands 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 Dine Brands Global are associated (or correlated) with Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Dine Brands i.e., Dine Brands and Starbucks go up and down completely randomly.
Pair Corralation between Dine Brands and Starbucks
Considering the 90-day investment horizon Dine Brands Global is expected to generate 3.1 times more return on investment than Starbucks. However, Dine Brands is 3.1 times more volatile than Starbucks. It trades about 0.2 of its potential returns per unit of risk. Starbucks is currently generating about 0.19 per unit of risk. If you would invest 3,044 in Dine Brands Global on September 1, 2024 and sell it today you would earn a total of 548.00 from holding Dine Brands Global or generate 18.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dine Brands Global vs. Starbucks
Performance |
| Timeline |
| Dine Brands Global |
| Starbucks |
Dine Brands and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dine Brands and Starbucks
The main advantage of trading using opposite Dine Brands and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dine Brands position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' long position.| Dine Brands vs. The Wendys Co | Dine Brands vs. Shake Shack | Dine Brands vs. Papa Johns International | Dine Brands vs. Darden Restaurants |
| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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