Correlation Between Western Digital and Dine Brands

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

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

Diversification Opportunities for Western Digital and Dine Brands

0.38

Correlation Coefficient

Western Digital  Dine Brands

Weak diversification

The 3 months correlation between Western and Dine is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital 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 Western Digital 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 Western Digital 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 Western Digital i.e., Western Digital and Dine Brands go up and down completely randomly.

Pair Corralation between Western Digital and Dine Brands

Considering the 90-day investment horizon Western Digital is expected to under-perform the Dine Brands. In addition to that, Western Digital is 1.05 times more volatile than Dine Brands Global. It trades about -0.16 of its total potential returns per unit of risk. Dine Brands Global is currently generating about -0.11 per unit of volatility. If you would invest  3,240  in Dine Brands Global on September 23, 2024 and sell it today you would lose (201.00) from holding Dine Brands Global or give up 6.2% of portfolio value over 90 days.

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

Western Digital  vs.  Dine Brands Global

Western Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Dine Brands Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Dine Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Western Digital and Dine Brands

The main advantage of trading using opposite Western Digital and Dine Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital 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 Western Digital 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.