Correlation Between Bloomin Brands and Good Times

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

By analyzing existing cross correlation between Bloomin Brands and Good Times Restaurants, you can compare the effects of market volatilities on Bloomin Brands and Good Times 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 Good Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloomin Brands and Good Times.

Diversification Opportunities for Bloomin Brands and Good Times

0.64

Correlation Coefficient

Bloomin Brands  Good Times

Poor diversification

The 3 months correlation between Bloomin and Good is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bloomin Brands and Good Times Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Times Restaurants 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 Good Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Times Restaurants has no effect on the direction of Bloomin Brands i.e., Bloomin Brands and Good Times go up and down completely randomly.

Pair Corralation between Bloomin Brands and Good Times

Given the investment horizon of 90 days Bloomin Brands is expected to under-perform the Good Times. But the stock apears to be less risky and, when comparing its historical volatility, Bloomin Brands is 1.01 times less risky than Good Times. The stock trades about -0.08 of its potential returns per unit of risk. The Good Times Restaurants is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  225.00  in Good Times Restaurants on September 12, 2024 and sell it today you would earn a total of  46.00  from holding Good Times Restaurants or generate 20.44% return on investment over 90 days.

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

Bloomin Brands  vs.  Good Times Restaurants

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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Good Times Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bloomin Brands and Good Times

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

The idea behind Bloomin Brands and Good Times Restaurants 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.