Correlation Between GameStop Corp and Texas Roadhouse

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

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

Diversification Opportunities for GameStop Corp and Texas Roadhouse

0.65

Correlation Coefficient

GameStop Corp  Texas Roadhouse

Poor diversification

The 3 months correlation between GameStop and Texas is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and GameStop Corp 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 GameStop Corp 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 GameStop Corp i.e., GameStop Corp and Texas Roadhouse go up and down completely randomly.

Pair Corralation between GameStop Corp and Texas Roadhouse

Assuming the 90 days trading horizon GameStop Corp is expected to under-perform the Texas Roadhouse. In addition to that, GameStop Corp is 1.91 times more volatile than Texas Roadhouse. It trades about -0.17 of its total potential returns per unit of risk. Texas Roadhouse is currently generating about -0.05 per unit of volatility. If you would invest  17,231  in Texas Roadhouse on December 30, 2024 and sell it today you would lose (1,141) from holding Texas Roadhouse or give up 6.62% of portfolio value over 90 days.

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

GameStop Corp  vs.  Texas Roadhouse

GameStop Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days GameStop Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Texas Roadhouse

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GameStop Corp and Texas Roadhouse

The main advantage of trading using opposite GameStop Corp and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GameStop Corp 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 GameStop Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.