Correlation Between Restaurant Brands and Golden Entertainment

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

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

Diversification Opportunities for Restaurant Brands and Golden Entertainment

-0.4

Correlation Coefficient

Restaurant Brands  Golden Entertainment

Very good diversification

The 3 months correlation between Restaurant and Golden is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Golden Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Entertainment and Restaurant 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 Restaurant Brands International are associated (or correlated) with Golden Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Entertainment has no effect on the direction of Restaurant Brands i.e., Restaurant Brands and Golden Entertainment go up and down completely randomly.

Pair Corralation between Restaurant Brands and Golden Entertainment

Considering the 90-day investment horizon Restaurant Brands is expected to generate 1.85 times less return on investment than Golden Entertainment. But when comparing it to its historical volatility, Restaurant Brands International is 1.6 times less risky than Golden Entertainment. It trades about 0.05 of its potential returns per unit of risk. Golden Entertainment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,138  in Golden Entertainment on August 31, 2024 and sell it today you would earn a total of  188.00  from holding Golden Entertainment or generate 5.99% return on investment over 90 days.

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

Restaurant Brands Internationa  vs.  Golden Entertainment

Restaurant Brands

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Restaurant Brands International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Restaurant Brands is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Golden Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Entertainment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Golden Entertainment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Restaurant Brands and Golden Entertainment

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

The idea behind Restaurant Brands International and Golden Entertainment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.