Correlation Between CCL Industries and Restaurant Brands

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

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

Diversification Opportunities for CCL Industries and Restaurant Brands

0.62

Correlation Coefficient

CCL Industries  Restaurant Brands

Poor diversification

The 3 months correlation between CCL and Restaurant is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CCL Industries and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant Brands and CCL Industries 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 CCL Industries are associated (or correlated) with Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of CCL Industries i.e., CCL Industries and Restaurant Brands go up and down completely randomly.

Pair Corralation between CCL Industries and Restaurant Brands

Assuming the 90 days trading horizon CCL Industries is expected to generate 0.94 times more return on investment than Restaurant Brands. However, CCL Industries is 1.07 times less risky than Restaurant Brands. It trades about -0.04 of its potential returns per unit of risk. Restaurant Brands International is currently generating about -0.08 per unit of risk. If you would invest  7,698  in CCL Industries on November 28, 2024 and sell it today you would lose (266.00) from holding CCL Industries or give up 3.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

CCL Industries  vs.  Restaurant Brands Internationa

CCL Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days CCL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CCL Industries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Restaurant Brands

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CCL Industries and Restaurant Brands

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

The idea behind CCL Industries and Restaurant Brands International 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.

Check out your portfolio center.

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.