Correlation Between Dennys Corp and NORTHERN

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

By analyzing existing cross correlation between Dennys Corp and NORTHERN TRUST PORATION, you can compare the effects of market volatilities on Dennys Corp and NORTHERN 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 NORTHERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dennys Corp and NORTHERN.

Diversification Opportunities for Dennys Corp and NORTHERN

0.21

Correlation Coefficient

Dennys Corp  NORTHERN

Modest diversification

The 3 months correlation between Dennys and NORTHERN is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dennys Corp and NORTHERN TRUST PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHERN TRUST PORATION 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 NORTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHERN TRUST PORATION has no effect on the direction of Dennys Corp i.e., Dennys Corp and NORTHERN go up and down completely randomly.

Pair Corralation between Dennys Corp and NORTHERN

Given the investment horizon of 90 days Dennys Corp is expected to under-perform the NORTHERN. In addition to that, Dennys Corp is 6.05 times more volatile than NORTHERN TRUST PORATION. It trades about -0.05 of its total potential returns per unit of risk. NORTHERN TRUST PORATION is currently generating about -0.03 per unit of volatility. If you would invest  8,565  in NORTHERN TRUST PORATION on October 7, 2024 and sell it today you would lose (336.00) from holding NORTHERN TRUST PORATION or give up 3.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.79%
Values	Daily Returns

Dennys Corp  vs.  NORTHERN TRUST PORATION

Dennys Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dennys Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Dennys Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NORTHERN TRUST PORATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORTHERN TRUST PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NORTHERN TRUST PORATION investors.

Pair Trading with Dennys Corp and NORTHERN

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

The idea behind Dennys Corp and NORTHERN TRUST PORATION 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.