Correlation Between Brinker International and PPG Industries

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

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

Diversification Opportunities for Brinker International and PPG Industries

-0.16

Correlation Coefficient

Brinker International  PPG Industries

Good diversification

The 3 months correlation between Brinker and PPG is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries 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 PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Brinker International i.e., Brinker International and PPG Industries go up and down completely randomly.

Pair Corralation between Brinker International and PPG Industries

Considering the 90-day investment horizon Brinker International is expected to generate 2.39 times more return on investment than PPG Industries. However, Brinker International is 2.39 times more volatile than PPG Industries. It trades about 0.08 of its potential returns per unit of risk. PPG Industries is currently generating about -0.07 per unit of risk. If you would invest  13,711  in Brinker International on December 26, 2024 and sell it today you would earn a total of  2,084  from holding Brinker International or generate 15.2% return on investment over 90 days.

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

Brinker International  vs.  PPG Industries

Brinker International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 6 (%) 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.

PPG Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Brinker International and PPG Industries

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

The idea behind Brinker International and PPG Industries 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.