Correlation Between Dennys Corp and AMERICAN

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

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

Diversification Opportunities for Dennys Corp and AMERICAN

-0.46

Correlation Coefficient

Dennys Corp  AMERICAN

Very good diversification

The 3 months correlation between Dennys and AMERICAN is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dennys Corp and AMERICAN FINL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN FINL GROUP and Dennys Corp 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 Dennys Corp are associated (or correlated) with AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN FINL GROUP has no effect on the direction of Dennys Corp i.e., Dennys Corp and AMERICAN go up and down completely randomly.

Pair Corralation between Dennys Corp and AMERICAN

Given the investment horizon of 90 days Dennys Corp is expected to under-perform the AMERICAN. In addition to that, Dennys Corp is 6.11 times more volatile than AMERICAN FINL GROUP. It trades about -0.12 of its total potential returns per unit of risk. AMERICAN FINL GROUP is currently generating about 0.07 per unit of volatility. If you would invest  8,340  in AMERICAN FINL GROUP on December 23, 2024 and sell it today you would earn a total of  270.00  from holding AMERICAN FINL GROUP or generate 3.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Dennys Corp  vs.  AMERICAN FINL GROUP

Dennys Corp

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

AMERICAN FINL GROUP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AMERICAN FINL GROUP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dennys Corp and AMERICAN

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

The idea behind Dennys Corp and AMERICAN FINL GROUP 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..