Correlation Between COPT Defense and Dine Brands

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

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

Diversification Opportunities for COPT Defense and Dine Brands

0.22

Correlation Coefficient

COPT Defense  Dine Brands

Modest diversification

The 3 months correlation between COPT and Dine is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding COPT Defense Properties 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 COPT Defense 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 COPT Defense Properties 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 COPT Defense i.e., COPT Defense and Dine Brands go up and down completely randomly.

Pair Corralation between COPT Defense and Dine Brands

Considering the 90-day investment horizon COPT Defense is expected to generate 2.06 times less return on investment than Dine Brands. But when comparing it to its historical volatility, COPT Defense Properties is 3.07 times less risky than Dine Brands. It trades about 0.03 of its potential returns per unit of risk. Dine Brands Global is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,968  in Dine Brands Global on September 22, 2024 and sell it today you would earn a total of  42.00  from holding Dine Brands Global or generate 1.42% return on investment over 90 days.

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

COPT Defense Properties  vs.  Dine Brands Global

COPT Defense Properties

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COPT Defense Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, COPT Defense is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail 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 COPT Defense and Dine Brands

The main advantage of trading using opposite COPT Defense and Dine Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COPT Defense 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 COPT Defense Properties 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.