Correlation Between Restaurant Brands and Dine Brands

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

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

Diversification Opportunities for Restaurant Brands and Dine Brands

-0.04

Correlation Coefficient

Restaurant Brands  Dine Brands

Good diversification

The 3 months correlation between Restaurant and Dine is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa 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 Restaurant 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 Restaurant Brands International 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 Restaurant Brands i.e., Restaurant Brands and Dine Brands go up and down completely randomly.

Pair Corralation between Restaurant Brands and Dine Brands

Considering the 90-day investment horizon Restaurant Brands International is expected to generate 0.53 times more return on investment than Dine Brands. However, Restaurant Brands International is 1.89 times less risky than Dine Brands. It trades about -0.15 of its potential returns per unit of risk. Dine Brands Global is currently generating about -0.17 per unit of risk. If you would invest  6,860  in Restaurant Brands International on September 27, 2024 and sell it today you would lose (276.00) from holding Restaurant Brands International or give up 4.02% of portfolio value over 90 days.

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

Restaurant Brands Internationa  vs.  Dine Brands Global

Restaurant Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Restaurant Brands International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Dine Brands Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dine Brands Global has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Restaurant Brands and Dine Brands

The main advantage of trading using opposite Restaurant Brands and Dine Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands 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 Restaurant Brands International 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.