Correlation Between Brinker International and NEW WORLD

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

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

Diversification Opportunities for Brinker International and NEW WORLD

-0.36

Correlation Coefficient

Brinker International  NEW WORLD

Very good diversification

The 3 months correlation between Brinker and NEW is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and NEW WORLD DEVCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW WORLD DEVCO and Brinker International 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 Brinker International are associated (or correlated) with NEW WORLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW WORLD DEVCO has no effect on the direction of Brinker International i.e., Brinker International and NEW WORLD go up and down completely randomly.

Pair Corralation between Brinker International and NEW WORLD

Assuming the 90 days horizon Brinker International is expected to generate 0.79 times more return on investment than NEW WORLD. However, Brinker International is 1.26 times less risky than NEW WORLD. It trades about 0.11 of its potential returns per unit of risk. NEW WORLD DEVCO is currently generating about -0.05 per unit of risk. If you would invest  3,400  in Brinker International on October 10, 2024 and sell it today you would earn a total of  9,700  from holding Brinker International or generate 285.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Brinker International  vs.  NEW WORLD DEVCO

Brinker International

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Brinker International reported solid returns over the last few months and may actually be approaching a breakup point.

NEW WORLD DEVCO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEW WORLD DEVCO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Brinker International and NEW WORLD

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

The idea behind Brinker International and NEW WORLD DEVCO 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.