Correlation Between Brinker International and Suncor Energy

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

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

Diversification Opportunities for Brinker International and Suncor Energy

0.39

Correlation Coefficient

Brinker International  Suncor Energy

Weak diversification

The 3 months correlation between Brinker and Suncor is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Suncor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncor Energy 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 Suncor Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncor Energy has no effect on the direction of Brinker International i.e., Brinker International and Suncor Energy go up and down completely randomly.

Pair Corralation between Brinker International and Suncor Energy

Considering the 90-day investment horizon Brinker International is expected to generate 2.42 times more return on investment than Suncor Energy. However, Brinker International is 2.42 times more volatile than Suncor Energy. It trades about 0.1 of its potential returns per unit of risk. Suncor Energy is currently generating about -0.01 per unit of risk. If you would invest  13,069  in Brinker International on November 27, 2024 and sell it today you would earn a total of  2,514  from holding Brinker International or generate 19.24% 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.  Suncor Energy

Brinker International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 8 (%) 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.

Suncor Energy

Risk-Adjusted Performance

Weak

Over the last 90 days Suncor Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Suncor Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Brinker International and Suncor Energy

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

The idea behind Brinker International and Suncor Energy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.