Correlation Between Dine Brands and Waste Management

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

Diversification Opportunities for Dine Brands and Waste Management

0.02

Correlation Coefficient

Dine Brands  Waste Management

Significant diversification

The 3 months correlation between Dine and Waste is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dine Brands Global and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Dine Brands i.e., Dine Brands and Waste Management go up and down completely randomly.

Pair Corralation between Dine Brands and Waste Management

Considering the 90-day investment horizon Dine Brands Global is expected to under-perform the Waste Management. In addition to that, Dine Brands is 2.42 times more volatile than Waste Management. It trades about -0.04 of its total potential returns per unit of risk. Waste Management is currently generating about 0.09 per unit of volatility. If you would invest  16,614  in Waste Management on November 28, 2024 and sell it today you would earn a total of  6,364  from holding Waste Management or generate 38.31% 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.  Waste Management

Dine Brands Global

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Waste Management

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Waste Management is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dine Brands and Waste Management

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

The idea behind Dine Brands Global and Waste Management 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.