Correlation Between Adient PLC and Dine Brands

Can any of the company-specific risk be diversified away by investing in both Adient PLC and Dine Brands 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 Adient PLC and Dine Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adient PLC and Dine Brands Global, you can compare the effects of market volatilities on Adient PLC and Dine Brands 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 Adient PLC with a short position of Dine Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adient PLC and Dine Brands.

Diversification Opportunities for Adient PLC and Dine Brands

0.54

Correlation Coefficient

Adient PLC  Dine Brands

Very weak diversification

The 3 months correlation between Adient and Dine is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and Dine Brands Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dine Brands Global and Adient PLC 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 Adient PLC are associated (or correlated) with Dine Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dine Brands Global has no effect on the direction of Adient PLC i.e., Adient PLC and Dine Brands go up and down completely randomly.

Pair Corralation between Adient PLC and Dine Brands

Given the investment horizon of 90 days Adient PLC is expected to under-perform the Dine Brands. But the stock apears to be less risky and, when comparing its historical volatility, Adient PLC is 1.51 times less risky than Dine Brands. The stock trades about -0.07 of its potential returns per unit of risk. The Dine Brands Global is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,992  in Dine Brands Global on October 25, 2024 and sell it today you would earn a total of  2.00  from holding Dine Brands Global or generate 0.07% return on investment over 90 days.

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

Adient PLC  vs.  Dine Brands Global

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Dine Brands Global

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Dine Brands is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Adient PLC and Dine Brands

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

The idea behind Adient PLC and Dine Brands Global 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.