Correlation Between BBB Foods and Dennys Corp
Can any of the company-specific risk be diversified away by investing in both BBB Foods and Dennys Corp 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 BBB Foods and Dennys Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and Dennys Corp, you can compare the effects of market volatilities on BBB Foods and Dennys Corp 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 BBB Foods with a short position of Dennys Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and Dennys Corp.
Diversification Opportunities for BBB Foods and Dennys Corp
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BBB and Dennys is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp and BBB Foods 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 BBB Foods are associated (or correlated) with Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of BBB Foods i.e., BBB Foods and Dennys Corp go up and down completely randomly.
Pair Corralation between BBB Foods and Dennys Corp
Given the investment horizon of 90 days BBB Foods is expected to under-perform the Dennys Corp. In addition to that, BBB Foods is 1.01 times more volatile than Dennys Corp. It trades about -0.14 of its total potential returns per unit of risk. Dennys Corp is currently generating about -0.04 per unit of volatility. If you would invest 657.00 in Dennys Corp on September 5, 2024 and sell it today you would lose (24.00) from holding Dennys Corp or give up 3.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BBB Foods vs. Dennys Corp
Performance |
| Timeline |
| BBB Foods |
| Dennys Corp |
BBB Foods and Dennys Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBB Foods and Dennys Corp
The main advantage of trading using opposite BBB Foods and Dennys Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods position performs unexpectedly, Dennys Corp 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 Dennys Corp will offset losses from the drop in Dennys Corp's long position.| BBB Foods vs. Flexible Solutions International | BBB Foods vs. Chester Mining | BBB Foods vs. Minerals Technologies | BBB Foods vs. Stepan Company |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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