Correlation Between TEXAS ROADHOUSE and TRAVEL LEISURE

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

By analyzing existing cross correlation between TEXAS ROADHOUSE and TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on TEXAS ROADHOUSE and TRAVEL LEISURE 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 TRAVEL LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of TEXAS ROADHOUSE and TRAVEL LEISURE.

Diversification Opportunities for TEXAS ROADHOUSE and TRAVEL LEISURE

0.95

Correlation Coefficient

TEXAS ROADHOUSE  TRAVEL LEISURE

Almost no diversification

The 3 months correlation between TEXAS and TRAVEL is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL 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 TRAVEL LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and TRAVEL LEISURE go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and TRAVEL LEISURE

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 1.48 times less return on investment than TRAVEL LEISURE. In addition to that, TEXAS ROADHOUSE is 1.21 times more volatile than TRAVEL LEISURE DL 01. It trades about 0.17 of its total potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about 0.3 per unit of volatility. If you would invest  3,802  in TRAVEL LEISURE DL 01 on September 19, 2024 and sell it today you would earn a total of  1,248  from holding TRAVEL LEISURE DL 01 or generate 32.82% return on investment over 90 days.

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

TEXAS ROADHOUSE  vs.  TRAVEL LEISURE DL 01

TEXAS ROADHOUSE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TEXAS ROADHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

TRAVEL LEISURE DL

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL LEISURE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TEXAS ROADHOUSE and TRAVEL LEISURE

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

The idea behind TEXAS ROADHOUSE and TRAVEL LEISURE DL 01 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.