Correlation Between Dave Busters and Microsoft

Can any of the company-specific risk be diversified away by investing in both Dave Busters and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on Dave Busters and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dave Busters and Microsoft.

Diversification Opportunities for Dave Busters and Microsoft

-0.12

Correlation Coefficient

Dave Busters  Microsoft

Good diversification

The 3 months correlation between Dave and Microsoft is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Dave Busters i.e., Dave Busters and Microsoft go up and down completely randomly.

Pair Corralation between Dave Busters and Microsoft

Assuming the 90 days horizon Dave Busters Entertainment is expected to under-perform the Microsoft. In addition to that, Dave Busters is 3.97 times more volatile than Microsoft. It trades about -0.32 of its total potential returns per unit of risk. Microsoft is currently generating about 0.12 per unit of volatility. If you would invest  40,020  in Microsoft on September 29, 2024 and sell it today you would earn a total of  1,080  from holding Microsoft or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Dave Busters Entertainment  vs.  Microsoft

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Microsoft

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dave Busters and Microsoft

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

The idea behind Dave Busters Entertainment and Microsoft 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.