Correlation Between Texas Roadhouse and S A P

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

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

Diversification Opportunities for Texas Roadhouse and S A P

0.72

Correlation Coefficient

Texas Roadhouse  S A P

Poor diversification

The 3 months correlation between Texas and SAP is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and S A P go up and down completely randomly.

Pair Corralation between Texas Roadhouse and S A P

Assuming the 90 days horizon Texas Roadhouse is expected to generate 1.02 times less return on investment than S A P. In addition to that, Texas Roadhouse is 1.57 times more volatile than SAP SE. It trades about 0.11 of its total potential returns per unit of risk. SAP SE is currently generating about 0.17 per unit of volatility. If you would invest  20,685  in SAP SE on September 22, 2024 and sell it today you would earn a total of  2,990  from holding SAP SE or generate 14.45% return on investment over 90 days.

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

Texas Roadhouse  vs.  SAP SE

Texas Roadhouse

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 8 (%) 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.

SAP SE

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Texas Roadhouse and S A P

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

The idea behind Texas Roadhouse and SAP SE 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 Global Correlations module to find global opportunities by holding instruments from different markets.