Correlation Between Dine Brands and Yuexiu Transport

Can any of the company-specific risk be diversified away by investing in both Dine Brands and Yuexiu Transport 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 Yuexiu Transport 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 Yuexiu Transport Infrastructure, you can compare the effects of market volatilities on Dine Brands and Yuexiu Transport 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 Yuexiu Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dine Brands and Yuexiu Transport.

Diversification Opportunities for Dine Brands and Yuexiu Transport

0.7

Correlation Coefficient

Dine Brands  Yuexiu Transport

Poor diversification

The 3 months correlation between Dine and Yuexiu is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dine Brands Global and Yuexiu Transport Infrastructur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuexiu Transport Inf 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 Yuexiu Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuexiu Transport Inf has no effect on the direction of Dine Brands i.e., Dine Brands and Yuexiu Transport go up and down completely randomly.

Pair Corralation between Dine Brands and Yuexiu Transport

Considering the 90-day investment horizon Dine Brands is expected to generate 1.75 times less return on investment than Yuexiu Transport. In addition to that, Dine Brands is 1.07 times more volatile than Yuexiu Transport Infrastructure. It trades about 0.07 of its total potential returns per unit of risk. Yuexiu Transport Infrastructure is currently generating about 0.13 per unit of volatility. If you would invest  45.00  in Yuexiu Transport Infrastructure on September 12, 2024 and sell it today you would earn a total of  13.00  from holding Yuexiu Transport Infrastructure or generate 28.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Dine Brands Global  vs.  Yuexiu Transport Infrastructur

Dine Brands Global

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Dine Brands displayed solid returns over the last few months and may actually be approaching a breakup point.

Yuexiu Transport Inf

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuexiu Transport Infrastructure are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Yuexiu Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dine Brands and Yuexiu Transport

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

The idea behind Dine Brands Global and Yuexiu Transport Infrastructure 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.