Correlation Between CITIC Telecom and TEXAS ROADHOUSE

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

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

Diversification Opportunities for CITIC Telecom and TEXAS ROADHOUSE

0.05

Correlation Coefficient

CITIC Telecom  TEXAS ROADHOUSE

Significant diversification

The 3 months correlation between CITIC and TEXAS is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and TEXAS ROADHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TEXAS ROADHOUSE and CITIC Telecom 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 CITIC Telecom International 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 CITIC Telecom i.e., CITIC Telecom and TEXAS ROADHOUSE go up and down completely randomly.

Pair Corralation between CITIC Telecom and TEXAS ROADHOUSE

Assuming the 90 days horizon CITIC Telecom International is expected to under-perform the TEXAS ROADHOUSE. In addition to that, CITIC Telecom is 1.61 times more volatile than TEXAS ROADHOUSE. It trades about -0.01 of its total potential returns per unit of risk. TEXAS ROADHOUSE is currently generating about 0.04 per unit of volatility. If you would invest  16,780  in TEXAS ROADHOUSE on October 21, 2024 and sell it today you would earn a total of  495.00  from holding TEXAS ROADHOUSE or generate 2.95% return on investment over 90 days.

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

CITIC Telecom International  vs.  TEXAS ROADHOUSE

CITIC Telecom Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC Telecom International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CITIC Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TEXAS ROADHOUSE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, TEXAS ROADHOUSE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CITIC Telecom and TEXAS ROADHOUSE

The main advantage of trading using opposite CITIC Telecom and TEXAS ROADHOUSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC Telecom 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 CITIC Telecom International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.