Correlation Between SFL and Dine Brands

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

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

Diversification Opportunities for SFL and Dine Brands

-0.28

Correlation Coefficient

SFL  Dine Brands

Very good diversification

The 3 months correlation between SFL and Dine is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. 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 SFL 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 SFL Corporation 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 SFL i.e., SFL and Dine Brands go up and down completely randomly.

Pair Corralation between SFL and Dine Brands

Considering the 90-day investment horizon SFL Corporation is expected to under-perform the Dine Brands. But the stock apears to be less risky and, when comparing its historical volatility, SFL Corporation is 2.58 times less risky than Dine Brands. The stock trades about -0.19 of its potential returns per unit of risk. The Dine Brands Global is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,140  in Dine Brands Global on September 21, 2024 and sell it today you would lose (130.00) from holding Dine Brands Global or give up 4.14% of portfolio value over 90 days.

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

SFL Corp.  vs.  Dine Brands Global

SFL Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFL Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains 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 SFL and Dine Brands

The main advantage of trading using opposite SFL and Dine Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SFL 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 SFL Corporation 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.