Correlation Between Eastern and Dine Brands

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

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

Diversification Opportunities for Eastern and Dine Brands

-0.3

Correlation Coefficient

Eastern  Dine Brands

Very good diversification

The 3 months correlation between Eastern and Dine is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Dine Brands Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dine Brands Global and Eastern 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 Eastern Co are associated (or correlated) with Dine Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dine Brands Global has no effect on the direction of Eastern i.e., Eastern and Dine Brands go up and down completely randomly.

Pair Corralation between Eastern and Dine Brands

Considering the 90-day investment horizon Eastern Co is expected to generate 1.18 times more return on investment than Dine Brands. However, Eastern is 1.18 times more volatile than Dine Brands Global. It trades about -0.14 of its potential returns per unit of risk. Dine Brands Global is currently generating about -0.31 per unit of risk. If you would invest  2,872  in Eastern Co on September 30, 2024 and sell it today you would lose (215.00) from holding Eastern Co or give up 7.49% of portfolio value over 90 days.

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

Eastern Co  vs.  Dine Brands Global

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co 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 primary indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Eastern and Dine Brands

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

The idea behind Eastern Co and Dine Brands Global 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.