Correlation Between Smart Share and Dennys Corp

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

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

Diversification Opportunities for Smart Share and Dennys Corp

-0.32

Correlation Coefficient

Smart Share  Dennys Corp

Very good diversification

The 3 months correlation between Smart and Dennys is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp and Smart Share 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 Smart Share Global are associated (or correlated) with Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of Smart Share i.e., Smart Share and Dennys Corp go up and down completely randomly.

Pair Corralation between Smart Share and Dennys Corp

Allowing for the 90-day total investment horizon Smart Share Global is expected to generate 0.9 times more return on investment than Dennys Corp. However, Smart Share Global is 1.11 times less risky than Dennys Corp. It trades about 0.02 of its potential returns per unit of risk. Dennys Corp is currently generating about -0.03 per unit of risk. If you would invest  71.00  in Smart Share Global on October 1, 2024 and sell it today you would earn a total of  0.90  from holding Smart Share Global or generate 1.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Smart Share Global  vs.  Dennys Corp

Smart Share Global

Risk-Adjusted Performance

0 of 100

Weak

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

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.

Pair Trading with Smart Share and Dennys Corp

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

The idea behind Smart Share Global and Dennys Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.