Correlation Between Universal and Dine Brands

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

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

Diversification Opportunities for Universal and Dine Brands

0.47

Correlation Coefficient

Universal  Dine Brands

Very weak diversification

The 3 months correlation between Universal and Dine is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Universal 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 Universal 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 Universal 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 Universal i.e., Universal and Dine Brands go up and down completely randomly.

Pair Corralation between Universal and Dine Brands

Considering the 90-day investment horizon Universal is expected to generate 0.45 times more return on investment than Dine Brands. However, Universal is 2.22 times less risky than Dine Brands. It trades about 0.1 of its potential returns per unit of risk. Dine Brands Global is currently generating about -0.02 per unit of risk. If you would invest  4,649  in Universal on September 24, 2024 and sell it today you would earn a total of  814.00  from holding Universal or generate 17.51% return on investment over 90 days.

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

Universal  vs.  Dine Brands Global

Universal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated 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 Universal and Dine Brands

The main advantage of trading using opposite Universal and Dine Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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 Universal 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.