Correlation Between Dave Busters and United Parks

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

Diversification Opportunities for Dave Busters and United Parks

0.72

Correlation Coefficient

Dave Busters  United Parks

Poor diversification

The 3 months correlation between Dave and United is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks Resorts 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 United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of Dave Busters i.e., Dave Busters and United Parks go up and down completely randomly.

Pair Corralation between Dave Busters and United Parks

Given the investment horizon of 90 days Dave Busters is expected to generate 1.43 times less return on investment than United Parks. In addition to that, Dave Busters is 1.78 times more volatile than United Parks Resorts. It trades about 0.07 of its total potential returns per unit of risk. United Parks Resorts is currently generating about 0.18 per unit of volatility. If you would invest  5,170  in United Parks Resorts on September 4, 2024 and sell it today you would earn a total of  859.00  from holding United Parks Resorts or generate 16.62% return on investment over 90 days.

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

Dave Busters Entertainment  vs.  United Parks Resorts

Dave Busters Enterta

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Busters Entertainment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Dave Busters showed solid returns over the last few months and may actually be approaching a breakup point.

United Parks Resorts

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Parks Resorts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, United Parks unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dave Busters and United Parks

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

The idea behind Dave Busters Entertainment and United Parks Resorts 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.