Correlation Between Brinker International and Xponential Fitness

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

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

Diversification Opportunities for Brinker International and Xponential Fitness

-0.33

Correlation Coefficient

Brinker International  Xponential Fitness

Very good diversification

The 3 months correlation between Brinker and Xponential is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Xponential Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xponential Fitness 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 Xponential Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xponential Fitness has no effect on the direction of Brinker International i.e., Brinker International and Xponential Fitness go up and down completely randomly.

Pair Corralation between Brinker International and Xponential Fitness

Considering the 90-day investment horizon Brinker International is expected to generate 0.6 times more return on investment than Xponential Fitness. However, Brinker International is 1.66 times less risky than Xponential Fitness. It trades about 0.17 of its potential returns per unit of risk. Xponential Fitness is currently generating about -0.15 per unit of risk. If you would invest  7,113  in Brinker International on June 24, 2024 and sell it today you would earn a total of  552.00  from holding Brinker International or generate 7.76% return on investment over 90 days.

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

Brinker International  vs.  Xponential Fitness

Brinker International

Risk-Adjusted Performance

2 of 100

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 October 2024.

Xponential Fitness

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Brinker International and Xponential Fitness

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

The idea behind Brinker International and Xponential Fitness 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.