Correlation Between TEXAS ROADHOUSE and Lion Biotechnologies

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

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

Diversification Opportunities for TEXAS ROADHOUSE and Lion Biotechnologies

-0.1

Correlation Coefficient

TEXAS ROADHOUSE  Lion Biotechnologies

Good diversification

The 3 months correlation between TEXAS and Lion is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and Lion Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Biotechnologies and TEXAS ROADHOUSE 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 TEXAS ROADHOUSE are associated (or correlated) with Lion Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Biotechnologies has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and Lion Biotechnologies go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and Lion Biotechnologies

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 0.46 times more return on investment than Lion Biotechnologies. However, TEXAS ROADHOUSE is 2.16 times less risky than Lion Biotechnologies. It trades about 0.13 of its potential returns per unit of risk. Lion Biotechnologies is currently generating about -0.07 per unit of risk. If you would invest  15,135  in TEXAS ROADHOUSE on September 23, 2024 and sell it today you would earn a total of  2,325  from holding TEXAS ROADHOUSE or generate 15.36% return on investment over 90 days.

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

TEXAS ROADHOUSE  vs.  Lion Biotechnologies

TEXAS ROADHOUSE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TEXAS ROADHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lion Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with TEXAS ROADHOUSE and Lion Biotechnologies

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

The idea behind TEXAS ROADHOUSE and Lion Biotechnologies 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.