Correlation Between Brinker International and Penn National

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

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

Diversification Opportunities for Brinker International and Penn National

0.23

Correlation Coefficient

Brinker International  Penn National

Modest diversification

The 3 months correlation between Brinker and Penn is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Brinker International i.e., Brinker International and Penn National go up and down completely randomly.

Pair Corralation between Brinker International and Penn National

Considering the 90-day investment horizon Brinker International is expected to generate 1.16 times more return on investment than Penn National. However, Brinker International is 1.16 times more volatile than Penn National Gaming. It trades about 0.15 of its potential returns per unit of risk. Penn National Gaming is currently generating about 0.08 per unit of risk. If you would invest  12,213  in Brinker International on November 19, 2024 and sell it today you would earn a total of  3,627  from holding Brinker International or generate 29.7% return on investment over 90 days.

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

Brinker International  vs.  Penn National Gaming

Brinker International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 11 (%) 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.

Penn National Gaming

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Penn National displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brinker International and Penn National

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

The idea behind Brinker International and Penn National Gaming 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.