Correlation Between Brinker International and Melco Resorts

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

By analyzing existing cross correlation between Brinker International and Melco Resorts Entertainment, you can compare the effects of market volatilities on Brinker International and Melco Resorts 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 Melco Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinker International and Melco Resorts.

Diversification Opportunities for Brinker International and Melco Resorts

-0.82

Correlation Coefficient

Brinker International  Melco Resorts

Pay attention - limited upside

The 3 months correlation between Brinker and Melco is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Melco Resorts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco Resorts Entert 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 Melco Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco Resorts Entert has no effect on the direction of Brinker International i.e., Brinker International and Melco Resorts go up and down completely randomly.

Pair Corralation between Brinker International and Melco Resorts

Considering the 90-day investment horizon Brinker International is expected to generate 1.05 times more return on investment than Melco Resorts. However, Brinker International is 1.05 times more volatile than Melco Resorts Entertainment. It trades about 0.02 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about -0.17 per unit of risk. If you would invest  13,227  in Brinker International on September 29, 2024 and sell it today you would earn a total of  20.00  from holding Brinker International or generate 0.15% return on investment over 90 days.

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

Brinker International  vs.  Melco Resorts Entertainment

Brinker International

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Brinker International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Melco Resorts Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melco Resorts Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Brinker International and Melco Resorts

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

The idea behind Brinker International and Melco Resorts Entertainment 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 Commodity Directory module to find actively traded commodities issued by global exchanges.