Correlation Between Dave Busters and Premier Foods

Can any of the company-specific risk be diversified away by investing in both Dave Busters and Premier Foods 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 Premier Foods 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 Premier Foods PLC, you can compare the effects of market volatilities on Dave Busters and Premier Foods 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 Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dave Busters and Premier Foods.

Diversification Opportunities for Dave Busters and Premier Foods

0.81

Correlation Coefficient

Dave Busters  Premier Foods

Very poor diversification

The 3 months correlation between Dave and Premier is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods PLC 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of Dave Busters i.e., Dave Busters and Premier Foods go up and down completely randomly.

Pair Corralation between Dave Busters and Premier Foods

Assuming the 90 days horizon Dave Busters Entertainment is expected to generate 2.42 times more return on investment than Premier Foods. However, Dave Busters is 2.42 times more volatile than Premier Foods PLC. It trades about 0.08 of its potential returns per unit of risk. Premier Foods PLC is currently generating about 0.14 per unit of risk. If you would invest  3,500  in Dave Busters Entertainment on September 5, 2024 and sell it today you would earn a total of  180.00  from holding Dave Busters Entertainment or generate 5.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Dave Busters Entertainment  vs.  Premier Foods PLC

Dave Busters Enterta

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Busters Entertainment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dave Busters reported solid returns over the last few months and may actually be approaching a breakup point.

Premier Foods PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking indicators, Premier Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dave Busters and Premier Foods

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

The idea behind Dave Busters Entertainment and Premier Foods PLC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.