Correlation Between Brinker International and First Watch
Can any of the company-specific risk be diversified away by investing in both Brinker International and First Watch 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 First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brinker International and First Watch Restaurant, you can compare the effects of market volatilities on Brinker International and First Watch 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 First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinker International and First Watch.
Diversification Opportunities for Brinker International and First Watch
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Brinker and First is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant 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 First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of Brinker International i.e., Brinker International and First Watch go up and down completely randomly.
Pair Corralation between Brinker International and First Watch
Considering the 90-day investment horizon Brinker International is expected to generate 0.65 times more return on investment than First Watch. However, Brinker International is 1.55 times less risky than First Watch. It trades about 0.52 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.09 per unit of risk. If you would invest 9,773 in Brinker International on August 28, 2024 and sell it today you would earn a total of 3,325 from holding Brinker International or generate 34.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brinker International vs. First Watch Restaurant
Performance |
| Timeline |
| Brinker International |
| First Watch Restaurant |
Brinker International and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brinker International and First Watch
The main advantage of trading using opposite Brinker International and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinker International position performs unexpectedly, First Watch 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 First Watch will offset losses from the drop in First Watch'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 |
| First Watch vs. Dine Brands Global | First Watch vs. Bloomin Brands | First Watch vs. BJs Restaurants | First Watch vs. The Cheesecake Factory |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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