Correlation Between Ruths Hospitality and Brinker International

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

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

Diversification Opportunities for Ruths Hospitality and Brinker International

0.85

Correlation Coefficient

Ruths Hospitality  Brinker International

Very poor diversification

The 3 months correlation between Ruths and Brinker is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ruths Hospitality Group and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International and Ruths Hospitality 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 Ruths Hospitality Group are associated (or correlated) with Brinker International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker International has no effect on the direction of Ruths Hospitality i.e., Ruths Hospitality and Brinker International go up and down completely randomly.

Pair Corralation between Ruths Hospitality and Brinker International

If you would invest  7,121  in Brinker International on September 1, 2024 and sell it today you would earn a total of  6,106  from holding Brinker International or generate 85.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.59%
Values	Daily Returns

Ruths Hospitality Group  vs.  Brinker International

Ruths Hospitality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruths Hospitality Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Ruths Hospitality is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Brinker International

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 33 (%) 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.

Pair Trading with Ruths Hospitality and Brinker International

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

The idea behind Ruths Hospitality Group and Brinker International 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.