Correlation Between Dine Brands and Hertz Global

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

Diversification Opportunities for Dine Brands and Hertz Global

0.5

Correlation Coefficient

Dine Brands  Hertz Global

Very weak diversification

The 3 months correlation between Dine and Hertz is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dine Brands Global and Hertz Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Holdings 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 Hertz Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hertz Global Holdings has no effect on the direction of Dine Brands i.e., Dine Brands and Hertz Global go up and down completely randomly.

Pair Corralation between Dine Brands and Hertz Global

Considering the 90-day investment horizon Dine Brands Global is expected to generate 0.56 times more return on investment than Hertz Global. However, Dine Brands Global is 1.78 times less risky than Hertz Global. It trades about -0.03 of its potential returns per unit of risk. Hertz Global Holdings is currently generating about -0.05 per unit of risk. If you would invest  4,183  in Dine Brands Global on September 21, 2024 and sell it today you would lose (1,173) from holding Dine Brands Global or give up 28.04% of portfolio value over 90 days.

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

Dine Brands Global  vs.  Hertz Global Holdings

Dine Brands Global

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Dine Brands is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Hertz Global Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Hertz Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dine Brands and Hertz Global

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

The idea behind Dine Brands Global and Hertz Global Holdings 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.