Correlation Between Naked Wines and Dine Brands

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

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

Diversification Opportunities for Naked Wines and Dine Brands

0.43

Correlation Coefficient

Naked Wines  Dine Brands

Very weak diversification

The 3 months correlation between Naked and Dine is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc 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 Naked Wines 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 Naked Wines plc 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 Naked Wines i.e., Naked Wines and Dine Brands go up and down completely randomly.

Pair Corralation between Naked Wines and Dine Brands

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Dine Brands. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 2.5 times less risky than Dine Brands. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Dine Brands Global is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,968  in Dine Brands Global on September 21, 2024 and sell it today you would earn a total of  71.00  from holding Dine Brands Global or generate 2.39% return on investment over 90 days.

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

Naked Wines plc  vs.  Dine Brands Global

Naked Wines plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dine Brands Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Dine Brands is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Naked Wines and Dine Brands

The main advantage of trading using opposite Naked Wines and Dine Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines 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 Naked Wines plc 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.