Correlation Between APPLIED MATERIALS and Texas Roadhouse

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

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

Diversification Opportunities for APPLIED MATERIALS and Texas Roadhouse

-0.39

Correlation Coefficient

APPLIED MATERIALS  Texas Roadhouse

Very good diversification

The 3 months correlation between APPLIED and Texas is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and Texas Roadhouse go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Texas Roadhouse

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the Texas Roadhouse. In addition to that, APPLIED MATERIALS is 1.35 times more volatile than Texas Roadhouse. It trades about 0.0 of its total potential returns per unit of risk. Texas Roadhouse is currently generating about 0.2 per unit of volatility. If you would invest  14,637  in Texas Roadhouse on September 14, 2024 and sell it today you would earn a total of  3,858  from holding Texas Roadhouse or generate 26.36% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  Texas Roadhouse

APPLIED MATERIALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APPLIED MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, APPLIED MATERIALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Texas Roadhouse

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 15 (%) 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.

Pair Trading with APPLIED MATERIALS and Texas Roadhouse

The main advantage of trading using opposite APPLIED MATERIALS and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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.

The idea behind APPLIED MATERIALS and Texas Roadhouse 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .