Correlation Between Dine Brands and Brother Industries

Can any of the company-specific risk be diversified away by investing in both Dine Brands and Brother Industries 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 Brother Industries 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 Brother Industries, you can compare the effects of market volatilities on Dine Brands and Brother Industries 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 Brother Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dine Brands and Brother Industries.

Diversification Opportunities for Dine Brands and Brother Industries

0.46

Correlation Coefficient

Dine Brands  Brother Industries

Very weak diversification

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

Pair Corralation between Dine Brands and Brother Industries

Considering the 90-day investment horizon Dine Brands Global is expected to under-perform the Brother Industries. But the stock apears to be less risky and, when comparing its historical volatility, Dine Brands Global is 1.07 times less risky than Brother Industries. The stock trades about -0.14 of its potential returns per unit of risk. The Brother Industries is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,789  in Brother Industries on September 17, 2024 and sell it today you would earn a total of  161.00  from holding Brother Industries or generate 9.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dine Brands Global  vs.  Brother Industries

Dine Brands Global

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Dine Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brother Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brother Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Dine Brands and Brother Industries

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

The idea behind Dine Brands Global and Brother Industries 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.