Correlation Between Waste Management and Dine Brands

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

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

Diversification Opportunities for Waste Management and Dine Brands

0.02

Correlation Coefficient

Waste Management  Dine Brands

Significant diversification

The 3 months correlation between Waste and Dine is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management 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 Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Dine Brands go up and down completely randomly.

Pair Corralation between Waste Management and Dine Brands

Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.68 times more return on investment than Dine Brands. However, Waste Management is 1.47 times less risky than Dine Brands. It trades about 0.25 of its potential returns per unit of risk. Dine Brands Global is currently generating about -0.44 per unit of risk. If you would invest  21,363  in Waste Management on November 28, 2024 and sell it today you would earn a total of  1,712  from holding Waste Management or generate 8.01% return on investment over 90 days.

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

Waste Management  vs.  Dine Brands Global

Waste Management

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Waste Management is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dine Brands Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dine Brands Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Waste Management and Dine Brands

The main advantage of trading using opposite Waste Management and Dine Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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 Waste Management 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.