Correlation Between Dine Brands and Avadel Pharmaceuticals

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

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

Diversification Opportunities for Dine Brands and Avadel Pharmaceuticals

0.05

Correlation Coefficient

Dine Brands  Avadel Pharmaceuticals

Significant diversification

The 3 months correlation between Dine and Avadel is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dine Brands Global and Avadel Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avadel Pharmaceuticals and Dine Brands 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 Dine Brands Global are associated (or correlated) with Avadel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avadel Pharmaceuticals has no effect on the direction of Dine Brands i.e., Dine Brands and Avadel Pharmaceuticals go up and down completely randomly.

Pair Corralation between Dine Brands and Avadel Pharmaceuticals

Considering the 90-day investment horizon Dine Brands Global is expected to under-perform the Avadel Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Dine Brands Global is 1.48 times less risky than Avadel Pharmaceuticals. The stock trades about -0.06 of its potential returns per unit of risk. The Avadel Pharmaceuticals PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. 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

Dine Brands Global  vs.  Avadel Pharmaceuticals PLC

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.

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.

Pair Trading with Dine Brands and Avadel Pharmaceuticals

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

The idea behind Dine Brands Global and Avadel Pharmaceuticals PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.