Correlation Between Media and Texas Roadhouse

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

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

Diversification Opportunities for Media and Texas Roadhouse

0.55

Correlation Coefficient

Media  Texas Roadhouse

Very weak diversification

The 3 months correlation between Media and Texas is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Media and Games and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and Media 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 Media and Games 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 Media i.e., Media and Texas Roadhouse go up and down completely randomly.

Pair Corralation between Media and Texas Roadhouse

Assuming the 90 days trading horizon Media and Games is expected to generate 2.43 times more return on investment than Texas Roadhouse. However, Media is 2.43 times more volatile than Texas Roadhouse. It trades about 0.11 of its potential returns per unit of risk. Texas Roadhouse is currently generating about 0.14 per unit of risk. If you would invest  98.00  in Media and Games on October 5, 2024 and sell it today you would earn a total of  204.00  from holding Media and Games or generate 208.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.68%
Values	Daily Returns

Media and Games  vs.  Texas Roadhouse

Media and Games

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Media and Games has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Media 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

0 of 100

Modest

Over the last 90 days Texas Roadhouse has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Texas Roadhouse may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Media and Texas Roadhouse

The main advantage of trading using opposite Media and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Media 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 Media and Games 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.