Correlation Between Dennys Corp and Western Midstream

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

By analyzing existing cross correlation between Dennys Corp and Western Midstream Partners, you can compare the effects of market volatilities on Dennys Corp and Western Midstream 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 Western Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dennys Corp and Western Midstream.

Diversification Opportunities for Dennys Corp and Western Midstream

-0.42

Correlation Coefficient

Dennys Corp  Western Midstream

Very good diversification

The 3 months correlation between Dennys and Western is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dennys Corp and Western Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Midstream 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 Western Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Midstream has no effect on the direction of Dennys Corp i.e., Dennys Corp and Western Midstream go up and down completely randomly.

Pair Corralation between Dennys Corp and Western Midstream

Given the investment horizon of 90 days Dennys Corp is expected to under-perform the Western Midstream. In addition to that, Dennys Corp is 2.66 times more volatile than Western Midstream Partners. It trades about 0.0 of its total potential returns per unit of risk. Western Midstream Partners is currently generating about 0.05 per unit of volatility. If you would invest  3,737  in Western Midstream Partners on September 28, 2024 and sell it today you would earn a total of  142.00  from holding Western Midstream Partners or generate 3.8% return on investment over 90 days.

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

Dennys Corp  vs.  Western Midstream Partners

Dennys Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dennys Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dennys Corp is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Western Midstream

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Midstream Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Western Midstream is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dennys Corp and Western Midstream

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

The idea behind Dennys Corp and Western Midstream Partners 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.