Correlation Between Texas Roadhouse and Banco Santander

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

By analyzing existing cross correlation between Texas Roadhouse and Banco Santander SA, you can compare the effects of market volatilities on Texas Roadhouse and Banco Santander 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 Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Roadhouse and Banco Santander.

Diversification Opportunities for Texas Roadhouse and Banco Santander

0.43

Correlation Coefficient

Texas Roadhouse  Banco Santander

Very weak diversification

The 3 months correlation between Texas and Banco is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Banco Santander go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Banco Santander

Assuming the 90 days horizon Texas Roadhouse is expected to generate 1.05 times more return on investment than Banco Santander. However, Texas Roadhouse is 1.05 times more volatile than Banco Santander SA. It trades about 0.27 of its potential returns per unit of risk. Banco Santander SA is currently generating about -0.12 per unit of risk. If you would invest  17,200  in Texas Roadhouse on September 4, 2024 and sell it today you would earn a total of  2,020  from holding Texas Roadhouse or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Texas Roadhouse  vs.  Banco Santander SA

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 nearly uncertain basic indicators, Texas Roadhouse reported solid returns over the last few months and may actually be approaching a breakup point.

Banco Santander SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Banco Santander is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Texas Roadhouse and Banco Santander

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

The idea behind Texas Roadhouse and Banco Santander SA 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.