Correlation Between Dennys Corp and Holdco Nuvo

Can any of the company-specific risk be diversified away by investing in both Dennys Corp and Holdco Nuvo 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 Dennys Corp and Holdco Nuvo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dennys Corp and Holdco Nuvo Group, you can compare the effects of market volatilities on Dennys Corp and Holdco Nuvo 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 Dennys Corp with a short position of Holdco Nuvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dennys Corp and Holdco Nuvo.

Diversification Opportunities for Dennys Corp and Holdco Nuvo

-0.04

Correlation Coefficient

Dennys Corp  Holdco Nuvo

Good diversification

The 3 months correlation between Dennys and Holdco is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Dennys Corp and Holdco Nuvo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holdco Nuvo Group and Dennys Corp 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 Dennys Corp are associated (or correlated) with Holdco Nuvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holdco Nuvo Group has no effect on the direction of Dennys Corp i.e., Dennys Corp and Holdco Nuvo go up and down completely randomly.

Pair Corralation between Dennys Corp and Holdco Nuvo

Given the investment horizon of 90 days Dennys Corp is expected to under-perform the Holdco Nuvo. But the stock apears to be less risky and, when comparing its historical volatility, Dennys Corp is 10.37 times less risky than Holdco Nuvo. The stock trades about -0.01 of its potential returns per unit of risk. The Holdco Nuvo Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  129.00  in Holdco Nuvo Group on September 2, 2024 and sell it today you would lose (128.80) from holding Holdco Nuvo Group or give up 99.84% of portfolio value over 90 days.

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

Dennys Corp  vs.  Holdco Nuvo Group

Dennys Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dennys Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Dennys Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Holdco Nuvo Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Holdco Nuvo Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Holdco Nuvo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dennys Corp and Holdco Nuvo

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

The idea behind Dennys Corp and Holdco Nuvo Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.