Correlation Between Dave Busters and LEGACY IRON

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

By analyzing existing cross correlation between Dave Busters Entertainment and LEGACY IRON ORE, you can compare the effects of market volatilities on Dave Busters and LEGACY IRON 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 Dave Busters with a short position of LEGACY IRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dave Busters and LEGACY IRON.

Diversification Opportunities for Dave Busters and LEGACY IRON

0.05

Correlation Coefficient

Dave Busters  LEGACY IRON

Significant diversification

The 3 months correlation between Dave and LEGACY is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment and LEGACY IRON ORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGACY IRON ORE and Dave Busters 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 Dave Busters Entertainment are associated (or correlated) with LEGACY IRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGACY IRON ORE has no effect on the direction of Dave Busters i.e., Dave Busters and LEGACY IRON go up and down completely randomly.

Pair Corralation between Dave Busters and LEGACY IRON

Assuming the 90 days horizon Dave Busters Entertainment is expected to under-perform the LEGACY IRON. In addition to that, Dave Busters is 6.43 times more volatile than LEGACY IRON ORE. It trades about -0.01 of its total potential returns per unit of risk. LEGACY IRON ORE is currently generating about -0.06 per unit of volatility. If you would invest  1.22  in LEGACY IRON ORE on October 22, 2024 and sell it today you would lose (0.17) from holding LEGACY IRON ORE or give up 13.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Dave Busters Entertainment  vs.  LEGACY IRON ORE

Dave Busters Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dave Busters Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

LEGACY IRON ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LEGACY IRON ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Dave Busters and LEGACY IRON

The main advantage of trading using opposite Dave Busters and LEGACY IRON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dave Busters position performs unexpectedly, LEGACY IRON 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 LEGACY IRON will offset losses from the drop in LEGACY IRON's long position.

The idea behind Dave Busters Entertainment and LEGACY IRON ORE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.