Correlation Between HE Equipment and Dine Brands

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

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

Diversification Opportunities for HE Equipment and Dine Brands

-0.5

Correlation Coefficient

HE Equipment  Dine Brands

Very good diversification

The 3 months correlation between HEES and Dine is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services 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 HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Dine Brands go up and down completely randomly.

Pair Corralation between HE Equipment and Dine Brands

Given the investment horizon of 90 days HE Equipment Services is expected to generate 2.17 times more return on investment than Dine Brands. However, HE Equipment is 2.17 times more volatile than Dine Brands Global. It trades about 0.05 of its potential returns per unit of risk. Dine Brands Global is currently generating about -0.06 per unit of risk. If you would invest  4,287  in HE Equipment Services on December 4, 2024 and sell it today you would earn a total of  5,123  from holding HE Equipment Services or generate 119.5% return on investment over 90 days.

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

HE Equipment Services  vs.  Dine Brands Global

HE Equipment Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with HE Equipment and Dine Brands

The main advantage of trading using opposite HE Equipment and Dine Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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 HE Equipment Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.