Correlation Between Brinker International and Genel Energy

Can any of the company-specific risk be diversified away by investing in both Brinker International and Genel Energy 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 Genel Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brinker International and Genel Energy plc, you can compare the effects of market volatilities on Brinker International and Genel Energy 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 Genel Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinker International and Genel Energy.

Diversification Opportunities for Brinker International and Genel Energy

-0.62

Correlation Coefficient

Brinker International  Genel Energy

Excellent diversification

The 3 months correlation between Brinker and Genel is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Genel Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genel Energy plc 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 Genel Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genel Energy plc has no effect on the direction of Brinker International i.e., Brinker International and Genel Energy go up and down completely randomly.

Pair Corralation between Brinker International and Genel Energy

Considering the 90-day investment horizon Brinker International is expected to generate 0.67 times more return on investment than Genel Energy. However, Brinker International is 1.49 times less risky than Genel Energy. It trades about 0.37 of its potential returns per unit of risk. Genel Energy plc is currently generating about -0.08 per unit of risk. If you would invest  6,811  in Brinker International on August 17, 2024 and sell it today you would earn a total of  4,838  from holding Brinker International or generate 71.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Brinker International  vs.  Genel Energy plc

Brinker International

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Brinker International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Genel Energy plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genel Energy plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Brinker International and Genel Energy

The main advantage of trading using opposite Brinker International and Genel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinker International position performs unexpectedly, Genel Energy 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 Genel Energy will offset losses from the drop in Genel Energy's long position.

The idea behind Brinker International and Genel Energy plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.