Correlation Between Microsoft and Brinker International
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Brinker International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Brinker International, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Brinker International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Brinker International.
Diversification Opportunities for Microsoft and Brinker International
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Brinker is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Brinker International go up and down completely randomly.
Pair Corralation between Microsoft and Brinker International
Given the investment horizon of 90 days Microsoft is expected to generate 15.73 times less return on investment than Brinker International. But when comparing it to its historical volatility, Microsoft is 1.82 times less risky than Brinker International. It trades about 0.05 of its potential returns per unit of risk. Brinker International is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 7,121 in Brinker International on August 31, 2024 and sell it today you would earn a total of 5,948 from holding Brinker International or generate 83.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Brinker International
Performance |
| Timeline |
| Microsoft |
| Brinker International |
Microsoft and Brinker International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Brinker International
The main advantage of trading using opposite Microsoft and Brinker International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Brinker International vs. Dennys Corp | Brinker International vs. Bloomin Brands | Brinker International vs. Jack In The | Brinker International vs. Dine Brands Global |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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