Correlation Between Brinker International and Restaurant Brands

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

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

Diversification Opportunities for Brinker International and Restaurant Brands

-0.72

Correlation Coefficient

Brinker International  Restaurant Brands

Pay attention - limited upside

The 3 months correlation between Brinker and Restaurant is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant Brands 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 Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of Brinker International i.e., Brinker International and Restaurant Brands go up and down completely randomly.

Pair Corralation between Brinker International and Restaurant Brands

Considering the 90-day investment horizon Brinker International is expected to generate 2.08 times more return on investment than Restaurant Brands. However, Brinker International is 2.08 times more volatile than Restaurant Brands International. It trades about 0.35 of its potential returns per unit of risk. Restaurant Brands International is currently generating about -0.08 per unit of risk. If you would invest  8,450  in Brinker International on October 8, 2024 and sell it today you would earn a total of  5,664  from holding Brinker International or generate 67.03% 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.  Restaurant Brands Internationa

Brinker International

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Brinker International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Restaurant Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Restaurant Brands International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Restaurant Brands 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 Restaurant Brands

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

The idea behind Brinker International and Restaurant Brands International 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.