Correlation Between Wingstop and Dave Busters

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

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

Diversification Opportunities for Wingstop and Dave Busters

-0.66

Correlation Coefficient

Wingstop  Dave Busters

Excellent diversification

The 3 months correlation between Wingstop and Dave is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Dave Busters Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Busters Enterta and Wingstop 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 Wingstop are associated (or correlated) with Dave Busters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Busters Enterta has no effect on the direction of Wingstop i.e., Wingstop and Dave Busters go up and down completely randomly.

Pair Corralation between Wingstop and Dave Busters

Given the investment horizon of 90 days Wingstop is expected to under-perform the Dave Busters. But the stock apears to be less risky and, when comparing its historical volatility, Wingstop is 1.01 times less risky than Dave Busters. The stock trades about -0.04 of its potential returns per unit of risk. The Dave Busters Entertainment is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,045  in Dave Busters Entertainment on September 3, 2024 and sell it today you would earn a total of  887.00  from holding Dave Busters Entertainment or generate 29.13% return on investment over 90 days.

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

Wingstop  vs.  Dave Busters Entertainment

Wingstop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Dave Busters Enterta

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Busters Entertainment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dave Busters showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wingstop and Dave Busters

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

The idea behind Wingstop and Dave Busters Entertainment 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.