Correlation Between Dave Busters and Old Dominion

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

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

Diversification Opportunities for Dave Busters and Old Dominion

0.79

Correlation Coefficient

Dave Busters  Old Dominion

Poor diversification

The 3 months correlation between Dave and Old is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment and Old Dominion Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Dominion Freight and Dave Busters 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 Dave Busters Entertainment are associated (or correlated) with Old Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Dominion Freight has no effect on the direction of Dave Busters i.e., Dave Busters and Old Dominion go up and down completely randomly.

Pair Corralation between Dave Busters and Old Dominion

Given the investment horizon of 90 days Dave Busters is expected to generate 1.67 times less return on investment than Old Dominion. In addition to that, Dave Busters is 1.21 times more volatile than Old Dominion Freight. It trades about 0.06 of its total potential returns per unit of risk. Old Dominion Freight is currently generating about 0.13 per unit of volatility. If you would invest  19,954  in Old Dominion Freight on August 19, 2024 and sell it today you would earn a total of  1,603  from holding Old Dominion Freight or generate 8.03% return on investment over 90 days.

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

Dave Busters Entertainment  vs.  Old Dominion Freight

Dave Busters Enterta

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Busters Entertainment are ranked lower than 7 (%) 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.

Old Dominion Freight

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Old Dominion Freight are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Old Dominion may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Dave Busters and Old Dominion

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

The idea behind Dave Busters Entertainment and Old Dominion Freight 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.