Correlation Between Brinker International and BT Brands

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

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

Diversification Opportunities for Brinker International and BT Brands

0.32

Correlation Coefficient

Brinker International  BT Brands

Weak diversification

The 3 months correlation between Brinker and BTBDW is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and BT Brands Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BT Brands Warrant 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 BT Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BT Brands Warrant has no effect on the direction of Brinker International i.e., Brinker International and BT Brands go up and down completely randomly.

Pair Corralation between Brinker International and BT Brands

Considering the 90-day investment horizon Brinker International is expected to generate 35.3 times less return on investment than BT Brands. But when comparing it to its historical volatility, Brinker International is 10.86 times less risky than BT Brands. It trades about 0.04 of its potential returns per unit of risk. BT Brands Warrant is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7.22  in BT Brands Warrant on December 20, 2024 and sell it today you would lose (3.10) from holding BT Brands Warrant or give up 42.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	44.07%
Values	Daily Returns

Brinker International  vs.  BT Brands Warrant

Brinker International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Brinker International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BT Brands Warrant

Risk-Adjusted Performance

OK

Over the last 90 days BT Brands Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady fundamental indicators, BT Brands showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brinker International and BT Brands

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

The idea behind Brinker International and BT Brands Warrant 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.