Correlation Between Dine Brands and Good Times

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

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

Diversification Opportunities for Dine Brands and Good Times

-0.53

Correlation Coefficient

Dine Brands  Good Times

Excellent diversification

The 3 months correlation between Dine and Good is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dine Brands Global and Good Times Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Times Restaurants and Dine Brands 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 Dine Brands Global are associated (or correlated) with Good Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Times Restaurants has no effect on the direction of Dine Brands i.e., Dine Brands and Good Times go up and down completely randomly.

Pair Corralation between Dine Brands and Good Times

Considering the 90-day investment horizon Dine Brands Global is expected to generate 1.98 times more return on investment than Good Times. However, Dine Brands is 1.98 times more volatile than Good Times Restaurants. It trades about 0.04 of its potential returns per unit of risk. Good Times Restaurants is currently generating about -0.07 per unit of risk. If you would invest  3,058  in Dine Brands Global on September 13, 2024 and sell it today you would earn a total of  108.00  from holding Dine Brands Global or generate 3.53% return on investment over 90 days.

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

Dine Brands Global  vs.  Good Times Restaurants

Dine Brands Global

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Dine Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Good Times Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Dine Brands and Good Times

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

The idea behind Dine Brands Global and Good Times Restaurants 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.

Check out your portfolio center.

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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.