Correlation Between Restaurant Brands and Red Robin

Can any of the company-specific risk be diversified away by investing in both Restaurant Brands and Red Robin 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 Red Robin 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 Red Robin Gourmet, you can compare the effects of market volatilities on Restaurant Brands and Red Robin 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 Red Robin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Red Robin.

Diversification Opportunities for Restaurant Brands and Red Robin

0.19

Correlation Coefficient

Restaurant Brands  Red Robin

Average diversification

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

Pair Corralation between Restaurant Brands and Red Robin

Considering the 90-day investment horizon Restaurant Brands International is expected to under-perform the Red Robin. But the stock apears to be less risky and, when comparing its historical volatility, Restaurant Brands International is 3.41 times less risky than Red Robin. The stock trades about -0.34 of its potential returns per unit of risk. The Red Robin Gourmet is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  559.00  in Red Robin Gourmet on October 8, 2024 and sell it today you would earn a total of  32.00  from holding Red Robin Gourmet or generate 5.72% return on investment over 90 days.

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

Restaurant Brands Internationa  vs.  Red Robin Gourmet

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.

Red Robin Gourmet

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Red Robin Gourmet are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Red Robin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Restaurant Brands and Red Robin

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

The idea behind Restaurant Brands International and Red Robin Gourmet 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.