Correlation Between Dine Brands and Bassett Furniture

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

Diversification Opportunities for Dine Brands and Bassett Furniture

0.6

Correlation Coefficient

Dine Brands  Bassett Furniture

Poor diversification

The 3 months correlation between Dine and Bassett is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dine Brands Global and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture 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 Bassett Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bassett Furniture has no effect on the direction of Dine Brands i.e., Dine Brands and Bassett Furniture go up and down completely randomly.

Pair Corralation between Dine Brands and Bassett Furniture

Considering the 90-day investment horizon Dine Brands Global is expected to generate 1.86 times more return on investment than Bassett Furniture. However, Dine Brands is 1.86 times more volatile than Bassett Furniture Industries. It trades about 0.04 of its potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.01 per unit of risk. If you would invest  2,969  in Dine Brands Global on September 14, 2024 and sell it today you would earn a total of  191.00  from holding Dine Brands Global or generate 6.43% return on investment over 90 days.

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

Dine Brands Global  vs.  Bassett Furniture 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.

Bassett Furniture

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Bassett Furniture Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Bassett Furniture is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dine Brands and Bassett Furniture

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

The idea behind Dine Brands Global and Bassett Furniture 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.