Correlation Between Brinker International and Biglari Holdings

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

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

Diversification Opportunities for Brinker International and Biglari Holdings

0.67

Correlation Coefficient

Brinker International  Biglari Holdings

Poor diversification

The 3 months correlation between Brinker and Biglari is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings 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 Biglari Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biglari Holdings has no effect on the direction of Brinker International i.e., Brinker International and Biglari Holdings go up and down completely randomly.

Pair Corralation between Brinker International and Biglari Holdings

Considering the 90-day investment horizon Brinker International is expected to generate 1.02 times more return on investment than Biglari Holdings. However, Brinker International is 1.02 times more volatile than Biglari Holdings. It trades about 0.36 of its potential returns per unit of risk. Biglari Holdings is currently generating about 0.28 per unit of risk. If you would invest  7,519  in Brinker International on September 17, 2024 and sell it today you would earn a total of  5,266  from holding Brinker International or generate 70.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.54%
Values	Daily Returns

Brinker International  vs.  Biglari Holdings

Brinker International

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 28 (%) 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.

Biglari Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Biglari Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brinker International and Biglari Holdings

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

The idea behind Brinker International and Biglari Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.