Correlation Between FormFactor and Dine Brands

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

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

Diversification Opportunities for FormFactor and Dine Brands

-0.36

Correlation Coefficient

FormFactor  Dine Brands

Very good diversification

The 3 months correlation between FormFactor and Dine is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and Dine Brands Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dine Brands Global and FormFactor 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 FormFactor are associated (or correlated) with Dine Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dine Brands Global has no effect on the direction of FormFactor i.e., FormFactor and Dine Brands go up and down completely randomly.

Pair Corralation between FormFactor and Dine Brands

Given the investment horizon of 90 days FormFactor is expected to generate 1.65 times less return on investment than Dine Brands. But when comparing it to its historical volatility, FormFactor is 1.47 times less risky than Dine Brands. It trades about 0.16 of its potential returns per unit of risk. Dine Brands Global is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,985  in Dine Brands Global on September 5, 2024 and sell it today you would earn a total of  473.00  from holding Dine Brands Global or generate 15.85% return on investment over 90 days.

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

FormFactor  vs.  Dine Brands Global

FormFactor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dine Brands Global

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with FormFactor and Dine Brands

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

The idea behind FormFactor and Dine Brands Global 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.