Correlation Between BRIT AMER and Restaurant Brands
Can any of the company-specific risk be diversified away by investing in both BRIT AMER and Restaurant 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 BRIT AMER and Restaurant Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRIT AMER TOBACCO and Restaurant Brands International, you can compare the effects of market volatilities on BRIT AMER and Restaurant 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 BRIT AMER with a short position of Restaurant Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and Restaurant Brands.
Diversification Opportunities for BRIT AMER and Restaurant Brands
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BRIT and Restaurant is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant Brands and BRIT AMER 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 BRIT AMER TOBACCO are associated (or correlated) with Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of BRIT AMER i.e., BRIT AMER and Restaurant Brands go up and down completely randomly.
Pair Corralation between BRIT AMER and Restaurant Brands
Assuming the 90 days trading horizon BRIT AMER TOBACCO is expected to generate 1.09 times more return on investment than Restaurant Brands. However, BRIT AMER is 1.09 times more volatile than Restaurant Brands International. It trades about 0.04 of its potential returns per unit of risk. Restaurant Brands International is currently generating about -0.43 per unit of risk. If you would invest 3,505 in BRIT AMER TOBACCO on October 25, 2024 and sell it today you would earn a total of 23.00 from holding BRIT AMER TOBACCO or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRIT AMER TOBACCO vs. Restaurant Brands Internationa
Performance |
| Timeline |
| BRIT AMER TOBACCO |
| Restaurant Brands |
BRIT AMER and Restaurant Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRIT AMER and Restaurant Brands
The main advantage of trading using opposite BRIT AMER and Restaurant Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER position performs unexpectedly, Restaurant 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 Restaurant Brands will offset losses from the drop in Restaurant Brands' long position.The idea behind BRIT AMER TOBACCO and Restaurant Brands 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.| Restaurant Brands vs. FAIR ISAAC | Restaurant Brands vs. SOGECLAIR SA INH | Restaurant Brands vs. FORWARD AIR P | Restaurant Brands vs. BRIT AMER TOBACCO |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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