Correlation Between Red Robin and Restaurant Brands

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

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

Diversification Opportunities for Red Robin and Restaurant Brands

0.19

Correlation Coefficient

Red Robin  Restaurant Brands

Average diversification

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

Pair Corralation between Red Robin and Restaurant Brands

Given the investment horizon of 90 days Red Robin Gourmet is expected to generate 3.41 times more return on investment than Restaurant Brands. However, Red Robin is 3.41 times more volatile than Restaurant Brands International. It trades about 0.1 of its potential returns per unit of risk. Restaurant Brands International is currently generating about -0.34 per unit of risk. 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

Red Robin Gourmet  vs.  Restaurant Brands Internationa

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.

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.

Pair Trading with Red Robin and Restaurant Brands

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

The idea behind Red Robin Gourmet and Restaurant Brands 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.