Correlation Between Transport International and Texas Roadhouse

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

By analyzing existing cross correlation between Transport International Holdings and Texas Roadhouse, you can compare the effects of market volatilities on Transport International and Texas Roadhouse 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 Transport International with a short position of Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport International and Texas Roadhouse.

Diversification Opportunities for Transport International and Texas Roadhouse

0.33

Correlation Coefficient

Transport International  Texas Roadhouse

Weak diversification

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

Pair Corralation between Transport International and Texas Roadhouse

Assuming the 90 days horizon Transport International Holdings is expected to generate 3.12 times more return on investment than Texas Roadhouse. However, Transport International is 3.12 times more volatile than Texas Roadhouse. It trades about 0.07 of its potential returns per unit of risk. Texas Roadhouse is currently generating about 0.1 per unit of risk. If you would invest  27.00  in Transport International Holdings on September 3, 2024 and sell it today you would earn a total of  69.00  from holding Transport International Holdings or generate 255.56% return on investment over 90 days.

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

Transport International Holdin  vs.  Texas Roadhouse

Transport International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transport International Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Transport International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Texas Roadhouse

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Texas Roadhouse reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transport International and Texas Roadhouse

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

The idea behind Transport International Holdings and Texas Roadhouse 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.