Correlation Between Chevron Corp and Brinker International

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

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

Diversification Opportunities for Chevron Corp and Brinker International

0.91

Correlation Coefficient

Chevron Corp  Brinker International

Almost no diversification

The 3 months correlation between Chevron and Brinker is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International and Chevron Corp 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 Chevron Corp are associated (or correlated) with Brinker International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker International has no effect on the direction of Chevron Corp i.e., Chevron Corp and Brinker International go up and down completely randomly.

Pair Corralation between Chevron Corp and Brinker International

Considering the 90-day investment horizon Chevron Corp is expected to generate 5.88 times less return on investment than Brinker International. But when comparing it to its historical volatility, Chevron Corp is 2.0 times less risky than Brinker International. It trades about 0.14 of its potential returns per unit of risk. Brinker International is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  7,152  in Brinker International on August 30, 2024 and sell it today you would earn a total of  5,917  from holding Brinker International or generate 82.73% return on investment over 90 days.

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

Chevron Corp  vs.  Brinker International

Chevron Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Brinker International

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Brinker International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and Brinker International

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

The idea behind Chevron Corp and Brinker 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.