Correlation Between United Homes and Dennys Corp

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

By analyzing existing cross correlation between United Homes Group and Dennys Corp, you can compare the effects of market volatilities on United Homes and Dennys Corp 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 United Homes with a short position of Dennys Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Homes and Dennys Corp.

Diversification Opportunities for United Homes and Dennys Corp

0.63

Correlation Coefficient

United Homes  Dennys Corp

Poor diversification

The 3 months correlation between United and Dennys is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding United Homes Group and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp and United Homes 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 United Homes Group are associated (or correlated) with Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of United Homes i.e., United Homes and Dennys Corp go up and down completely randomly.

Pair Corralation between United Homes and Dennys Corp

Considering the 90-day investment horizon United Homes is expected to generate 1.2 times less return on investment than Dennys Corp. In addition to that, United Homes is 1.21 times more volatile than Dennys Corp. It trades about 0.11 of its total potential returns per unit of risk. Dennys Corp is currently generating about 0.16 per unit of volatility. If you would invest  577.00  in Dennys Corp on October 24, 2024 and sell it today you would earn a total of  48.00  from holding Dennys Corp or generate 8.32% return on investment over 90 days.

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

United Homes Group  vs.  Dennys Corp

United Homes Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Homes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Dennys Corp

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dennys Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dennys Corp is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with United Homes and Dennys Corp

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

The idea behind United Homes Group and Dennys Corp 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.