Correlation Between Dennys Corp and Maiden Holdings

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Can any of the company-specific risk be diversified away by investing in both Dennys Corp and Maiden Holdings 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 Dennys Corp and Maiden Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dennys Corp and Maiden Holdings, you can compare the effects of market volatilities on Dennys Corp and Maiden Holdings 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 Dennys Corp with a short position of Maiden Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dennys Corp and Maiden Holdings.

Diversification Opportunities for Dennys Corp and Maiden Holdings

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Dennys and Maiden is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dennys Corp and Maiden Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maiden Holdings and Dennys Corp 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 Dennys Corp are associated (or correlated) with Maiden Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maiden Holdings has no effect on the direction of Dennys Corp i.e., Dennys Corp and Maiden Holdings go up and down completely randomly.

Pair Corralation between Dennys Corp and Maiden Holdings

Given the investment horizon of 90 days Dennys Corp is expected to under-perform the Maiden Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Dennys Corp is 1.53 times less risky than Maiden Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The Maiden Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  223.00  in Maiden Holdings on December 29, 2023 and sell it today you would lose (6.00) from holding Maiden Holdings or give up 2.69% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Dennys Corp  vs.  Maiden Holdings

 Performance 
       Timeline  
Dennys Corp 

Risk-Adjusted Performance

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High
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 inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Maiden Holdings 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Maiden Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Maiden Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Dennys Corp and Maiden Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dennys Corp and Maiden Holdings

The main advantage of trading using opposite Dennys Corp and Maiden Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dennys Corp position performs unexpectedly, Maiden Holdings 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 Maiden Holdings will offset losses from the drop in Maiden Holdings' long position.
The idea behind Dennys Corp and Maiden Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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