Correlation Between Dave Busters and Contact Energy

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

By analyzing existing cross correlation between Dave Busters Entertainment and Contact Energy Limited, you can compare the effects of market volatilities on Dave Busters and Contact Energy 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 Dave Busters with a short position of Contact Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dave Busters and Contact Energy.

Diversification Opportunities for Dave Busters and Contact Energy

0.23

Correlation Coefficient

Dave Busters  Contact Energy

Modest diversification

The 3 months correlation between Dave and Contact is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment and Contact Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contact Energy and Dave Busters 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 Dave Busters Entertainment are associated (or correlated) with Contact Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contact Energy has no effect on the direction of Dave Busters i.e., Dave Busters and Contact Energy go up and down completely randomly.

Pair Corralation between Dave Busters and Contact Energy

Assuming the 90 days horizon Dave Busters Entertainment is expected to under-perform the Contact Energy. In addition to that, Dave Busters is 3.29 times more volatile than Contact Energy Limited. It trades about -0.26 of its total potential returns per unit of risk. Contact Energy Limited is currently generating about -0.05 per unit of volatility. If you would invest  472.00  in Contact Energy Limited on September 28, 2024 and sell it today you would lose (8.00) from holding Contact Energy Limited or give up 1.69% of portfolio value over 90 days.

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

Dave Busters Entertainment  vs.  Contact Energy Limited

Dave Busters Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dave Busters Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Contact Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Contact Energy Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Contact Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dave Busters and Contact Energy

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

The idea behind Dave Busters Entertainment and Contact Energy Limited 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.