Correlation Between Emera Maine and Dennys Corp

Can any of the company-specific risk be diversified away by investing in both Emera Maine and Dennys Corp 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 Emera Maine and Dennys Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emera Maine PFD and Dennys Corp, you can compare the effects of market volatilities on Emera Maine and Dennys Corp 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 Emera Maine with a short position of Dennys Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emera Maine and Dennys Corp.

Diversification Opportunities for Emera Maine and Dennys Corp

0.02

Correlation Coefficient

Emera Maine  Dennys Corp

Significant diversification

The 3 months correlation between Emera and Dennys is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Emera Maine PFD and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp and Emera Maine 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 Emera Maine PFD are associated (or correlated) with Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of Emera Maine i.e., Emera Maine and Dennys Corp go up and down completely randomly.

Pair Corralation between Emera Maine and Dennys Corp

Assuming the 90 days horizon Emera Maine PFD is expected to generate 0.15 times more return on investment than Dennys Corp. However, Emera Maine PFD is 6.58 times less risky than Dennys Corp. It trades about 0.0 of its potential returns per unit of risk. Dennys Corp is currently generating about -0.04 per unit of risk. If you would invest  9,825  in Emera Maine PFD on September 28, 2024 and sell it today you would earn a total of  0.00  from holding Emera Maine PFD or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	25.4%
Values	Daily Returns

Emera Maine PFD  vs.  Dennys Corp

Emera Maine PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emera Maine PFD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Emera Maine is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Dennys Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dennys Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dennys Corp is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Emera Maine and Dennys Corp

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

The idea behind Emera Maine PFD and Dennys Corp 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.