Correlation Between Dennys Corp and World Houseware

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

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

Diversification Opportunities for Dennys Corp and World Houseware

0.0

Correlation Coefficient

Dennys Corp  World Houseware

Pay attention - limited upside

The 3 months correlation between Dennys and World is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dennys Corp and World Houseware Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Houseware 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 World Houseware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Houseware has no effect on the direction of Dennys Corp i.e., Dennys Corp and World Houseware go up and down completely randomly.

Pair Corralation between Dennys Corp and World Houseware

Given the investment horizon of 90 days Dennys Corp is expected to under-perform the World Houseware. But the stock apears to be less risky and, when comparing its historical volatility, Dennys Corp is 1.63 times less risky than World Houseware. The stock trades about -0.03 of its potential returns per unit of risk. The World Houseware Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7.00  in World Houseware Limited on October 5, 2024 and sell it today you would lose (2.00) from holding World Houseware Limited or give up 28.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

Dennys Corp  vs.  World Houseware Limited

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 uncertain basic indicators, Dennys Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

World Houseware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Houseware Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, World Houseware is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dennys Corp and World Houseware

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

The idea behind Dennys Corp and World Houseware Limited 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.