Correlation Between Compass Group and Brinker International
Can any of the company-specific risk be diversified away by investing in both Compass Group 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 Compass Group and Brinker International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Group PLC and Brinker International, you can compare the effects of market volatilities on Compass Group 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 Compass Group with a short position of Brinker International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Brinker International.
Diversification Opportunities for Compass Group and Brinker International
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Compass and Brinker is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International and Compass Group 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 Compass Group PLC 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 Compass Group i.e., Compass Group and Brinker International go up and down completely randomly.
Pair Corralation between Compass Group and Brinker International
Assuming the 90 days trading horizon Compass Group is expected to generate 5.82 times less return on investment than Brinker International. But when comparing it to its historical volatility, Compass Group PLC is 2.08 times less risky than Brinker International. It trades about 0.13 of its potential returns per unit of risk. Brinker International is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 6,350 in Brinker International on September 12, 2024 and sell it today you would earn a total of 5,650 from holding Brinker International or generate 88.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Compass Group PLC vs. Brinker International
Performance |
Timeline |
Compass Group PLC |
Brinker International |
Compass Group and Brinker International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Compass Group and Brinker International
The main advantage of trading using opposite Compass Group and Brinker International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group 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.Compass Group vs. Starbucks | Compass Group vs. Superior Plus Corp | Compass Group vs. SIVERS SEMICONDUCTORS AB | Compass Group vs. NorAm Drilling AS |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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