Correlation Between Restaurant Brands and Pinstripes Holdings

Can any of the company-specific risk be diversified away by investing in both Restaurant Brands and Pinstripes 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 Restaurant Brands and Pinstripes Holdings 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 Pinstripes Holdings, you can compare the effects of market volatilities on Restaurant Brands and Pinstripes 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 Restaurant Brands with a short position of Pinstripes Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Pinstripes Holdings.

Diversification Opportunities for Restaurant Brands and Pinstripes Holdings

-0.57

Correlation Coefficient

Restaurant Brands  Pinstripes Holdings

Excellent diversification

The 3 months correlation between Restaurant and Pinstripes is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Pinstripes Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinstripes Holdings 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 Pinstripes Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinstripes Holdings has no effect on the direction of Restaurant Brands i.e., Restaurant Brands and Pinstripes Holdings go up and down completely randomly.

Pair Corralation between Restaurant Brands and Pinstripes Holdings

Considering the 90-day investment horizon Restaurant Brands International is expected to generate 0.15 times more return on investment than Pinstripes Holdings. However, Restaurant Brands International is 6.72 times less risky than Pinstripes Holdings. It trades about 0.07 of its potential returns per unit of risk. Pinstripes Holdings is currently generating about -0.11 per unit of risk. If you would invest  6,738  in Restaurant Brands International on September 5, 2024 and sell it today you would earn a total of  344.00  from holding Restaurant Brands International or generate 5.11% 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.  Pinstripes Holdings

Restaurant Brands

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Restaurant Brands International are ranked lower than 5 (%) 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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Pinstripes Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinstripes Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Restaurant Brands and Pinstripes Holdings

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

The idea behind Restaurant Brands International and Pinstripes 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.