Correlation Between DAX Index and Brinker International

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

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

Diversification Opportunities for DAX Index and Brinker International

0.57

Correlation Coefficient

DAX Index  Brinker International

Very weak diversification

The 3 months correlation between DAX and Brinker is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International and DAX Index 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 DAX Index are associated (or correlated) with Brinker International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker International has no effect on the direction of DAX Index i.e., DAX Index and Brinker International go up and down completely randomly.

Pair Corralation between DAX Index and Brinker International

Assuming the 90 days trading horizon DAX Index is expected to generate 16.33 times less return on investment than Brinker International. But when comparing it to its historical volatility, DAX Index is 4.23 times less risky than Brinker International. It trades about 0.09 of its potential returns per unit of risk. Brinker International is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  7,050  in Brinker International on October 2, 2024 and sell it today you would earn a total of  6,150  from holding Brinker International or generate 87.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

DAX Index  vs.  Brinker International

Pair Trading with DAX Index and Brinker International

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

The idea behind DAX Index and Brinker 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.

Check out your portfolio center.

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.