Correlation Between Montauk Renewables and Texas Roadhouse

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

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

Diversification Opportunities for Montauk Renewables and Texas Roadhouse

0.1

Correlation Coefficient

Montauk Renewables  Texas Roadhouse

Average diversification

The 3 months correlation between Montauk and Texas is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and Texas Roadhouse go up and down completely randomly.

Pair Corralation between Montauk Renewables and Texas Roadhouse

Given the investment horizon of 90 days Montauk Renewables is expected to generate 2.94 times less return on investment than Texas Roadhouse. In addition to that, Montauk Renewables is 2.37 times more volatile than Texas Roadhouse. It trades about 0.03 of its total potential returns per unit of risk. Texas Roadhouse is currently generating about 0.21 per unit of volatility. If you would invest  16,608  in Texas Roadhouse on September 3, 2024 and sell it today you would earn a total of  3,919  from holding Texas Roadhouse or generate 23.6% return on investment over 90 days.

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

Montauk Renewables  vs.  Texas Roadhouse

Montauk Renewables

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Montauk Renewables are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Montauk Renewables may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Texas Roadhouse

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Texas Roadhouse demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Montauk Renewables and Texas Roadhouse

The main advantage of trading using opposite Montauk Renewables and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.