Correlation Between Brinker International and Nio

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

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

Diversification Opportunities for Brinker International and Nio

-0.78

Correlation Coefficient

Brinker International  Nio

Pay attention - limited upside

The 3 months correlation between Brinker and Nio is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of Brinker International i.e., Brinker International and Nio go up and down completely randomly.

Pair Corralation between Brinker International and Nio

Considering the 90-day investment horizon Brinker International is expected to generate 0.6 times more return on investment than Nio. However, Brinker International is 1.66 times less risky than Nio. It trades about 0.19 of its potential returns per unit of risk. Nio Class A is currently generating about 0.03 per unit of risk. If you would invest  7,125  in Brinker International on September 19, 2024 and sell it today you would earn a total of  6,252  from holding Brinker International or generate 87.75% return on investment over 90 days.

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

Brinker International  vs.  Nio Class A

Brinker International

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 29 (%) 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.

Nio Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nio Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward 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 Nio

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

The idea behind Brinker International and Nio Class A 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..