Correlation Between Texas Roadhouse and Ark Restaurants

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

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

Diversification Opportunities for Texas Roadhouse and Ark Restaurants

-0.35

Correlation Coefficient

Texas Roadhouse  Ark Restaurants

Very good diversification

The 3 months correlation between Texas and Ark is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp 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 Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Ark Restaurants go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Ark Restaurants

Given the investment horizon of 90 days Texas Roadhouse is expected to under-perform the Ark Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, Texas Roadhouse is 4.32 times less risky than Ark Restaurants. The stock trades about -0.13 of its potential returns per unit of risk. The Ark Restaurants Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,009  in Ark Restaurants Corp on September 22, 2024 and sell it today you would earn a total of  120.00  from holding Ark Restaurants Corp or generate 11.89% 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.  Ark Restaurants Corp

Texas Roadhouse

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Texas Roadhouse is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Ark Restaurants Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ark Restaurants Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Ark Restaurants is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Texas Roadhouse and Ark Restaurants

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

The idea behind Texas Roadhouse and Ark Restaurants Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.