Correlation Between Avadel Pharmaceuticals and Dine Brands

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

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

Diversification Opportunities for Avadel Pharmaceuticals and Dine Brands

0.05

Correlation Coefficient

Avadel Pharmaceuticals  Dine Brands

Significant diversification

The 3 months correlation between Avadel and Dine is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Avadel Pharmaceuticals 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 Avadel Pharmaceuticals 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 Avadel Pharmaceuticals 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 Avadel Pharmaceuticals i.e., Avadel Pharmaceuticals and Dine Brands go up and down completely randomly.

Pair Corralation between Avadel Pharmaceuticals and Dine Brands

Given the investment horizon of 90 days Avadel Pharmaceuticals PLC is expected to generate 1.48 times more return on investment than Dine Brands. However, Avadel Pharmaceuticals is 1.48 times more volatile than Dine Brands Global. It trades about 0.04 of its potential returns per unit of risk. Dine Brands Global is currently generating about -0.06 per unit of risk. If you would invest  692.00  in Avadel Pharmaceuticals PLC on October 11, 2024 and sell it today you would earn a total of  377.00  from holding Avadel Pharmaceuticals PLC or generate 54.48% return on investment over 90 days.

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

Avadel Pharmaceuticals PLC  vs.  Dine Brands Global

Avadel Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avadel Pharmaceuticals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Dine Brands Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dine Brands Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Avadel Pharmaceuticals and Dine Brands

The main advantage of trading using opposite Avadel Pharmaceuticals and Dine Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avadel Pharmaceuticals 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 Avadel Pharmaceuticals 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.