Correlation Between Brinker International and Exxon

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

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

Diversification Opportunities for Brinker International and Exxon

-0.41

Correlation Coefficient

Brinker International  Exxon

Very good diversification

The 3 months correlation between Brinker and Exxon is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Brinker International i.e., Brinker International and Exxon go up and down completely randomly.

Pair Corralation between Brinker International and Exxon

Considering the 90-day investment horizon Brinker International is expected to generate 2.83 times more return on investment than Exxon. However, Brinker International is 2.83 times more volatile than Exxon Mobil Corp. It trades about 0.1 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about -0.08 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Brinker International  vs.  Exxon Mobil Corp

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.

Exxon Mobil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brinker International and Exxon

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

The idea behind Brinker International and Exxon Mobil Corp 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.