Correlation Between Brinker International and NETGEAR

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

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

Diversification Opportunities for Brinker International and NETGEAR

0.63

Correlation Coefficient

Brinker International  NETGEAR

Poor diversification

The 3 months correlation between Brinker and NETGEAR is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Brinker International i.e., Brinker International and NETGEAR go up and down completely randomly.

Pair Corralation between Brinker International and NETGEAR

Considering the 90-day investment horizon Brinker International is expected to generate 1.38 times more return on investment than NETGEAR. However, Brinker International is 1.38 times more volatile than NETGEAR. It trades about 0.1 of its potential returns per unit of risk. NETGEAR is currently generating about 0.04 per unit of risk. If you would invest  13,227  in Brinker International on November 28, 2024 and sell it today you would earn a total of  2,356  from holding Brinker International or generate 17.81% return on investment over 90 days.

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

Brinker International  vs.  NETGEAR

Brinker International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 7 (%) 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.

NETGEAR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, NETGEAR is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Brinker International and NETGEAR

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

The idea behind Brinker International and NETGEAR 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.