Correlation Between MTRLimited and Texas Roadhouse

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

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

Diversification Opportunities for MTRLimited and Texas Roadhouse

-0.05

Correlation Coefficient

MTRLimited  Texas Roadhouse

Good diversification

The 3 months correlation between MTRLimited and Texas is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding MTR Limited and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and MTRLimited 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 MTR Limited 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 MTRLimited i.e., MTRLimited and Texas Roadhouse go up and down completely randomly.

Pair Corralation between MTRLimited and Texas Roadhouse

Assuming the 90 days horizon MTR Limited is expected to generate 0.76 times more return on investment than Texas Roadhouse. However, MTR Limited is 1.31 times less risky than Texas Roadhouse. It trades about -0.06 of its potential returns per unit of risk. Texas Roadhouse is currently generating about -0.11 per unit of risk. If you would invest  330.00  in MTR Limited on December 21, 2024 and sell it today you would lose (18.00) from holding MTR Limited or give up 5.45% of portfolio value over 90 days.

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

MTR Limited  vs.  Texas Roadhouse

MTR Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days MTR Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MTRLimited 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

Very Weak

Over the last 90 days Texas Roadhouse has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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.

Pair Trading with MTRLimited and Texas Roadhouse

The main advantage of trading using opposite MTRLimited and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTRLimited 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 MTR Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.