Correlation Between Alta Equipment and Dave Busters

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

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

Diversification Opportunities for Alta Equipment and Dave Busters

0.54

Correlation Coefficient

Alta Equipment  Dave Busters

Very weak diversification

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

Pair Corralation between Alta Equipment and Dave Busters

Given the investment horizon of 90 days Alta Equipment is expected to generate 1.02 times less return on investment than Dave Busters. In addition to that, Alta Equipment is 1.2 times more volatile than Dave Busters Entertainment. It trades about 0.11 of its total potential returns per unit of risk. Dave Busters Entertainment is currently generating about 0.13 per unit of volatility. If you would invest  3,045  in Dave Busters Entertainment on September 3, 2024 and sell it today you would earn a total of  855.00  from holding Dave Busters Entertainment or generate 28.08% return on investment over 90 days.

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

Alta Equipment Group  vs.  Dave Busters Entertainment

Alta Equipment Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Alta Equipment reported solid returns over the last few months and may actually be approaching a breakup point.

Dave Busters Enterta

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Busters Entertainment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dave Busters showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alta Equipment and Dave Busters

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

The idea behind Alta Equipment Group and Dave Busters Entertainment 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.