Correlation Between Texas Roadhouse and Chuys Holdings

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

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

Diversification Opportunities for Texas Roadhouse and Chuys Holdings

-0.39

Correlation Coefficient

Texas Roadhouse  Chuys Holdings

Very good diversification

The 3 months correlation between Texas and Chuys is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Chuys Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chuys Holdings 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 Chuys Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chuys Holdings has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Chuys Holdings go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Chuys Holdings

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 22.77 times more return on investment than Chuys Holdings. However, Texas Roadhouse is 22.77 times more volatile than Chuys Holdings. It trades about 0.21 of its potential returns per unit of risk. Chuys Holdings is currently generating about 0.36 per unit of risk. If you would invest  16,608  in Texas Roadhouse on September 1, 2024 and sell it today you would earn a total of  3,919  from holding Texas Roadhouse or generate 23.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.03%
Values	Daily Returns

Texas Roadhouse  vs.  Chuys Holdings

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 fairly weak basic indicators, Texas Roadhouse demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Chuys Holdings

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Chuys Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chuys Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Texas Roadhouse and Chuys Holdings

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

The idea behind Texas Roadhouse and Chuys Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.