Correlation Between Brinker International and Nathans Famous

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

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

Diversification Opportunities for Brinker International and Nathans Famous

0.18

Correlation Coefficient

Brinker International  Nathans Famous

Average diversification

The 3 months correlation between Brinker and Nathans is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Nathans Famous in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nathans Famous 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 Nathans Famous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nathans Famous has no effect on the direction of Brinker International i.e., Brinker International and Nathans Famous go up and down completely randomly.

Pair Corralation between Brinker International and Nathans Famous

Considering the 90-day investment horizon Brinker International is expected to generate 1.47 times more return on investment than Nathans Famous. However, Brinker International is 1.47 times more volatile than Nathans Famous. It trades about 0.11 of its potential returns per unit of risk. Nathans Famous is currently generating about 0.02 per unit of risk. If you would invest  4,067  in Brinker International on October 3, 2024 and sell it today you would earn a total of  9,162  from holding Brinker International or generate 225.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Brinker International  vs.  Nathans Famous

Brinker International

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 26 (%) 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.

Nathans Famous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nathans Famous has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nathans Famous is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Brinker International and Nathans Famous

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

The idea behind Brinker International and Nathans Famous 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.