Correlation Between Brinker International and Wingstop

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

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

Diversification Opportunities for Brinker International and Wingstop

0.67

Correlation Coefficient

Brinker International  Wingstop

Poor diversification

The 3 months correlation between Brinker and Wingstop is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop 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 Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of Brinker International i.e., Brinker International and Wingstop go up and down completely randomly.

Pair Corralation between Brinker International and Wingstop

Considering the 90-day investment horizon Brinker International is expected to generate 1.22 times more return on investment than Wingstop. However, Brinker International is 1.22 times more volatile than Wingstop. It trades about 0.03 of its potential returns per unit of risk. Wingstop is currently generating about -0.05 per unit of risk. If you would invest  14,364  in Brinker International on January 15, 2025 and sell it today you would earn a total of  400.00  from holding Brinker International or generate 2.78% 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.  Wingstop

Brinker International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Brinker International may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Wingstop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Brinker International and Wingstop

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

The idea behind Brinker International and Wingstop 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.