Correlation Between Bloomin Brands and Golden Entertainment

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

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

Diversification Opportunities for Bloomin Brands and Golden Entertainment

-0.5

Correlation Coefficient

Bloomin Brands  Golden Entertainment

Very good diversification

The 3 months correlation between Bloomin and Golden is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bloomin Brands and Golden Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Entertainment and Bloomin 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 Bloomin Brands are associated (or correlated) with Golden Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Entertainment has no effect on the direction of Bloomin Brands i.e., Bloomin Brands and Golden Entertainment go up and down completely randomly.

Pair Corralation between Bloomin Brands and Golden Entertainment

Given the investment horizon of 90 days Bloomin Brands is expected to under-perform the Golden Entertainment. In addition to that, Bloomin Brands is 1.62 times more volatile than Golden Entertainment. It trades about -0.07 of its total potential returns per unit of risk. Golden Entertainment is currently generating about 0.06 per unit of volatility. If you would invest  3,138  in Golden Entertainment on August 31, 2024 and sell it today you would earn a total of  188.00  from holding Golden Entertainment or generate 5.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bloomin Brands  vs.  Golden Entertainment

Bloomin Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Golden Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Entertainment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Golden Entertainment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Bloomin Brands and Golden Entertainment

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

The idea behind Bloomin Brands and Golden Entertainment 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.