Correlation Between Dave Busters and Fanhua

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

By analyzing existing cross correlation between Dave Busters Entertainment and Fanhua Inc, you can compare the effects of market volatilities on Dave Busters and Fanhua 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 Dave Busters with a short position of Fanhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dave Busters and Fanhua.

Diversification Opportunities for Dave Busters and Fanhua

0.13

Correlation Coefficient

Dave Busters  Fanhua

Average diversification

The 3 months correlation between Dave and Fanhua is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment and Fanhua Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanhua Inc and Dave Busters 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 Dave Busters Entertainment are associated (or correlated) with Fanhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanhua Inc has no effect on the direction of Dave Busters i.e., Dave Busters and Fanhua go up and down completely randomly.

Pair Corralation between Dave Busters and Fanhua

Given the investment horizon of 90 days Dave Busters Entertainment is expected to generate 2.2 times more return on investment than Fanhua. However, Dave Busters is 2.2 times more volatile than Fanhua Inc. It trades about -0.07 of its potential returns per unit of risk. Fanhua Inc is currently generating about -0.33 per unit of risk. If you would invest  3,539  in Dave Busters Entertainment on October 9, 2024 and sell it today you would lose (483.00) from holding Dave Busters Entertainment or give up 13.65% of portfolio value over 90 days.

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

Dave Busters Entertainment  vs.  Fanhua Inc

Dave Busters Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dave Busters Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dave Busters is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fanhua Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanhua Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Dave Busters and Fanhua

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

The idea behind Dave Busters Entertainment and Fanhua Inc 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.