Correlation Between El Pollo and Bloomin Brands
Can any of the company-specific risk be diversified away by investing in both El Pollo and Bloomin 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 El Pollo and Bloomin Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Pollo Loco and Bloomin Brands, you can compare the effects of market volatilities on El Pollo and Bloomin 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 El Pollo with a short position of Bloomin Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Pollo and Bloomin Brands.
Diversification Opportunities for El Pollo and Bloomin Brands
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LOCO and Bloomin is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding El Pollo Loco and Bloomin Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloomin Brands and El Pollo 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 El Pollo Loco are associated (or correlated) with Bloomin Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloomin Brands has no effect on the direction of El Pollo i.e., El Pollo and Bloomin Brands go up and down completely randomly.
Pair Corralation between El Pollo and Bloomin Brands
Given the investment horizon of 90 days El Pollo Loco is expected to generate 0.89 times more return on investment than Bloomin Brands. However, El Pollo Loco is 1.12 times less risky than Bloomin Brands. It trades about 0.02 of its potential returns per unit of risk. Bloomin Brands is currently generating about -0.02 per unit of risk. If you would invest 1,066 in El Pollo Loco on August 27, 2024 and sell it today you would earn a total of 164.00 from holding El Pollo Loco or generate 15.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
El Pollo Loco vs. Bloomin Brands
Performance |
| Timeline |
| El Pollo Loco |
| Bloomin Brands |
El Pollo and Bloomin Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with El Pollo and Bloomin Brands
The main advantage of trading using opposite El Pollo and Bloomin Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Pollo position performs unexpectedly, Bloomin 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 Bloomin Brands will offset losses from the drop in Bloomin Brands' long position.| El Pollo vs. FAT Brands | El Pollo vs. Potbelly Co | El Pollo vs. BJs Restaurants | El Pollo vs. One Group Hospitality |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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