Correlation Between Portillos and Bloomin Brands

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

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

Diversification Opportunities for Portillos and Bloomin Brands

0.71

Correlation Coefficient

Portillos  Bloomin Brands

Poor diversification

The 3 months correlation between Portillos and Bloomin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Portillos and Bloomin Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloomin Brands and Portillos 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 Portillos are associated (or correlated) with Bloomin Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloomin Brands has no effect on the direction of Portillos i.e., Portillos and Bloomin Brands go up and down completely randomly.

Pair Corralation between Portillos and Bloomin Brands

Given the investment horizon of 90 days Portillos is expected to generate 0.75 times more return on investment than Bloomin Brands. However, Portillos is 1.33 times less risky than Bloomin Brands. It trades about -0.04 of its potential returns per unit of risk. Bloomin Brands is currently generating about -0.08 per unit of risk. If you would invest  1,198  in Portillos on September 3, 2024 and sell it today you would lose (89.00) from holding Portillos or give up 7.43% of portfolio value over 90 days.

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

Portillos  vs.  Bloomin Brands

Portillos

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Portillos and Bloomin Brands

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

The idea behind Portillos and Bloomin Brands 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..