Correlation Between Restaurant Brands and Supremex

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

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

Diversification Opportunities for Restaurant Brands and Supremex

0.19

Correlation Coefficient

Restaurant Brands  Supremex

Average diversification

The 3 months correlation between Restaurant and Supremex is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Supremex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supremex and Restaurant Brands 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 Restaurant Brands International are associated (or correlated) with Supremex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supremex has no effect on the direction of Restaurant Brands i.e., Restaurant Brands and Supremex go up and down completely randomly.

Pair Corralation between Restaurant Brands and Supremex

Assuming the 90 days trading horizon Restaurant Brands International is expected to generate 0.92 times more return on investment than Supremex. However, Restaurant Brands International is 1.09 times less risky than Supremex. It trades about -0.06 of its potential returns per unit of risk. Supremex is currently generating about -0.17 per unit of risk. If you would invest  9,731  in Restaurant Brands International on September 26, 2024 and sell it today you would lose (137.00) from holding Restaurant Brands International or give up 1.41% of portfolio value over 90 days.

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

Restaurant Brands Internationa  vs.  Supremex

Restaurant Brands

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Restaurant Brands International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Restaurant Brands is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Supremex

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Restaurant Brands and Supremex

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

The idea behind Restaurant Brands International and Supremex 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.