Correlation Between Brinker International and Air Products

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

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

Diversification Opportunities for Brinker International and Air Products

0.74

Correlation Coefficient

Brinker International  Air Products

Poor diversification

The 3 months correlation between Brinker and Air is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Brinker International i.e., Brinker International and Air Products go up and down completely randomly.

Pair Corralation between Brinker International and Air Products

Considering the 90-day investment horizon Brinker International is expected to generate 1.56 times more return on investment than Air Products. However, Brinker International is 1.56 times more volatile than Air Products and. It trades about 0.42 of its potential returns per unit of risk. Air Products and is currently generating about 0.11 per unit of risk. If you would invest  7,039  in Brinker International on September 13, 2024 and sell it today you would earn a total of  5,935  from holding Brinker International or generate 84.32% return on investment over 90 days.

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

Brinker International  vs.  Air Products and

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 unfluctuating basic indicators, Brinker International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Air Products

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Air Products may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brinker International and Air Products

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

The idea behind Brinker International and Air Products and 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.