Correlation Between Brinker International and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Brinker International and Alcoa Corp 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 Brinker International and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brinker International and Alcoa Corp, you can compare the effects of market volatilities on Brinker International and Alcoa Corp 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 Brinker International with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinker International and Alcoa Corp.
Diversification Opportunities for Brinker International and Alcoa Corp
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brinker and Alcoa is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Brinker International 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 Brinker International are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Brinker International i.e., Brinker International and Alcoa Corp go up and down completely randomly.
Pair Corralation between Brinker International and Alcoa Corp
Considering the 90-day investment horizon Brinker International is expected to generate 0.74 times more return on investment than Alcoa Corp. However, Brinker International is 1.34 times less risky than Alcoa Corp. It trades about 0.53 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.24 per unit of risk. If you would invest 10,271 in Brinker International on September 1, 2024 and sell it today you would earn a total of 2,956 from holding Brinker International or generate 28.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brinker International vs. Alcoa Corp
Performance |
| Timeline |
| Brinker International |
| Alcoa Corp |
Brinker International and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brinker International and Alcoa Corp
The main advantage of trading using opposite Brinker International and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinker International position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| Brinker International vs. Dennys Corp | Brinker International vs. Bloomin Brands | Brinker International vs. Jack In The | Brinker International vs. Dine Brands Global |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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