Correlation Between Brinker International and Covenant Logistics

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

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

Diversification Opportunities for Brinker International and Covenant Logistics

0.85

Correlation Coefficient

Brinker International  Covenant Logistics

Very poor diversification

The 3 months correlation between Brinker and Covenant is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics 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 Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics has no effect on the direction of Brinker International i.e., Brinker International and Covenant Logistics go up and down completely randomly.

Pair Corralation between Brinker International and Covenant Logistics

Assuming the 90 days horizon Brinker International is expected to generate 1.97 times more return on investment than Covenant Logistics. However, Brinker International is 1.97 times more volatile than Covenant Logistics Group. It trades about 0.12 of its potential returns per unit of risk. Covenant Logistics Group is currently generating about -0.12 per unit of risk. If you would invest  12,400  in Brinker International on September 29, 2024 and sell it today you would earn a total of  800.00  from holding Brinker International or generate 6.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Brinker International  vs.  Covenant Logistics Group

Brinker International

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Brinker International reported solid returns over the last few months and may actually be approaching a breakup point.

Covenant Logistics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Covenant Logistics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brinker International and Covenant Logistics

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

The idea behind Brinker International and Covenant Logistics Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.