Correlation Between American Eagle and Texas Roadhouse
Can any of the company-specific risk be diversified away by investing in both American Eagle and Texas Roadhouse 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 American Eagle and Texas Roadhouse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Eagle Outfitters and Texas Roadhouse, you can compare the effects of market volatilities on American Eagle and Texas Roadhouse 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 American Eagle with a short position of Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Texas Roadhouse.
Diversification Opportunities for American Eagle and Texas Roadhouse
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Texas is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and American Eagle 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 American Eagle Outfitters are associated (or correlated) with Texas Roadhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Roadhouse has no effect on the direction of American Eagle i.e., American Eagle and Texas Roadhouse go up and down completely randomly.
Pair Corralation between American Eagle and Texas Roadhouse
Assuming the 90 days trading horizon American Eagle is expected to generate 2.52 times less return on investment than Texas Roadhouse. In addition to that, American Eagle is 1.73 times more volatile than Texas Roadhouse. It trades about 0.02 of its total potential returns per unit of risk. Texas Roadhouse is currently generating about 0.08 per unit of volatility. If you would invest 9,437 in Texas Roadhouse on December 4, 2024 and sell it today you would earn a total of 7,663 from holding Texas Roadhouse or generate 81.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
American Eagle Outfitters vs. Texas Roadhouse
Performance |
Timeline |
American Eagle Outfitters |
Texas Roadhouse |
American Eagle and Texas Roadhouse Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Eagle and Texas Roadhouse
The main advantage of trading using opposite American Eagle and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Texas Roadhouse 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 Texas Roadhouse will offset losses from the drop in Texas Roadhouse's long position.American Eagle vs. OURGAME INTHOLDL 00005 | American Eagle vs. GAMES BOX SA | American Eagle vs. CAREER EDUCATION | American Eagle vs. TROPHY GAMES DEV |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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