Correlation Between Bloomin Brands and Noodles

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

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

Diversification Opportunities for Bloomin Brands and Noodles

0.84

Correlation Coefficient

Bloomin Brands  Noodles

Very poor diversification

The 3 months correlation between Bloomin and Noodles is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bloomin Brands and Noodles Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noodles Company 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 Noodles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noodles Company has no effect on the direction of Bloomin Brands i.e., Bloomin Brands and Noodles go up and down completely randomly.

Pair Corralation between Bloomin Brands and Noodles

Given the investment horizon of 90 days Bloomin Brands is expected to generate 0.66 times more return on investment than Noodles. However, Bloomin Brands is 1.51 times less risky than Noodles. It trades about -0.07 of its potential returns per unit of risk. Noodles Company is currently generating about -0.18 per unit of risk. If you would invest  1,564  in Bloomin Brands on September 12, 2024 and sell it today you would lose (277.50) from holding Bloomin Brands or give up 17.74% of portfolio value over 90 days.

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

Bloomin Brands  vs.  Noodles Company

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 inconsistent 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.

Noodles Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noodles Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bloomin Brands and Noodles

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

The idea behind Bloomin Brands and Noodles Company 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.