Correlation Between Apple and TEXAS ROADHOUSE

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

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

Diversification Opportunities for Apple and TEXAS ROADHOUSE

0.76

Correlation Coefficient

Apple  TEXAS ROADHOUSE

Poor diversification

The 3 months correlation between Apple and TEXAS is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and TEXAS ROADHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TEXAS ROADHOUSE and Apple 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 Apple Inc 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 Apple i.e., Apple and TEXAS ROADHOUSE go up and down completely randomly.

Pair Corralation between Apple and TEXAS ROADHOUSE

Assuming the 90 days trading horizon Apple is expected to generate 1.12 times less return on investment than TEXAS ROADHOUSE. But when comparing it to its historical volatility, Apple Inc is 1.52 times less risky than TEXAS ROADHOUSE. It trades about 0.27 of its potential returns per unit of risk. TEXAS ROADHOUSE is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  14,632  in TEXAS ROADHOUSE on September 14, 2024 and sell it today you would earn a total of  3,568  from holding TEXAS ROADHOUSE or generate 24.38% return on investment over 90 days.

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

Apple Inc  vs.  TEXAS ROADHOUSE

Apple Inc

Risk-Adjusted Performance

20 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

TEXAS ROADHOUSE

Risk-Adjusted Performance

15 of 100

Solid

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. In spite of rather uncertain basic indicators, TEXAS ROADHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and TEXAS ROADHOUSE

The main advantage of trading using opposite Apple and TEXAS ROADHOUSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.