Correlation Between Heidelberg Materials and Texas Roadhouse

Can any of the company-specific risk be diversified away by investing in both Heidelberg 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 Heidelberg 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 Heidelberg Materials AG and Texas Roadhouse, you can compare the effects of market volatilities on Heidelberg 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 Heidelberg Materials with a short position of Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heidelberg Materials and Texas Roadhouse.

Diversification Opportunities for Heidelberg Materials and Texas Roadhouse

-0.79

Correlation Coefficient

Heidelberg Materials  Texas Roadhouse

Pay attention - limited upside

The 3 months correlation between Heidelberg and Texas is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and Heidelberg 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 Heidelberg Materials AG 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 Heidelberg Materials i.e., Heidelberg Materials and Texas Roadhouse go up and down completely randomly.

Pair Corralation between Heidelberg Materials and Texas Roadhouse

Assuming the 90 days horizon Heidelberg Materials AG is expected to generate 2.24 times more return on investment than Texas Roadhouse. However, Heidelberg Materials is 2.24 times more volatile than Texas Roadhouse. It trades about 0.15 of its potential returns per unit of risk. Texas Roadhouse is currently generating about -0.05 per unit of risk. If you would invest  11,965  in Heidelberg Materials AG on December 29, 2024 and sell it today you would earn a total of  4,705  from holding Heidelberg Materials AG or generate 39.32% return on investment over 90 days.

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

Heidelberg Materials AG  vs.  Texas Roadhouse

Heidelberg Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Heidelberg Materials reported solid returns over the last few months and may actually be approaching a breakup point.

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 Heidelberg Materials and Texas Roadhouse

The main advantage of trading using opposite Heidelberg Materials and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heidelberg 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 Heidelberg Materials AG 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.