Correlation Between Restaurant Brands and Transcontinental
Can any of the company-specific risk be diversified away by investing in both Restaurant Brands and Transcontinental 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 Restaurant Brands and Transcontinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Restaurant Brands International and Transcontinental, you can compare the effects of market volatilities on Restaurant Brands and Transcontinental 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 Restaurant Brands with a short position of Transcontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Transcontinental.
Diversification Opportunities for Restaurant Brands and Transcontinental
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Restaurant and Transcontinental is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental and Restaurant Brands 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 Restaurant Brands International are associated (or correlated) with Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of Restaurant Brands i.e., Restaurant Brands and Transcontinental go up and down completely randomly.
Pair Corralation between Restaurant Brands and Transcontinental
Assuming the 90 days trading horizon Restaurant Brands International is expected to under-perform the Transcontinental. But the stock apears to be less risky and, when comparing its historical volatility, Restaurant Brands International is 1.45 times less risky than Transcontinental. The stock trades about -0.06 of its potential returns per unit of risk. The Transcontinental is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,714 in Transcontinental on September 25, 2024 and sell it today you would earn a total of 139.00 from holding Transcontinental or generate 8.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Restaurant Brands Internationa vs. Transcontinental
Performance |
| Timeline |
| Restaurant Brands |
| Transcontinental |
Restaurant Brands and Transcontinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Restaurant Brands and Transcontinental
The main advantage of trading using opposite Restaurant Brands and Transcontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands position performs unexpectedly, Transcontinental 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 Transcontinental will offset losses from the drop in Transcontinental's long position.| Restaurant Brands vs. JPMorgan Chase Co | Restaurant Brands vs. Toronto Dominion Bank | Restaurant Brands vs. Royal Bank of | Restaurant Brands vs. Royal Bank of |
| Transcontinental vs. Quebecor | Transcontinental vs. Winpak | Transcontinental vs. Restaurant Brands International | Transcontinental vs. ATCO |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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