Correlation Between TEXAS ROADHOUSE and Gear Energy

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

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

Diversification Opportunities for TEXAS ROADHOUSE and Gear Energy

-0.51

Correlation Coefficient

TEXAS ROADHOUSE  Gear Energy

Excellent diversification

The 3 months correlation between TEXAS and Gear is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy and TEXAS ROADHOUSE 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 TEXAS ROADHOUSE are associated (or correlated) with Gear Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear Energy has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and Gear Energy go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and Gear Energy

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to under-perform the Gear Energy. But the stock apears to be less risky and, when comparing its historical volatility, TEXAS ROADHOUSE is 2.47 times less risky than Gear Energy. The stock trades about -0.39 of its potential returns per unit of risk. The Gear Energy is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Gear Energy on October 1, 2024 and sell it today you would lose (4.00) from holding Gear Energy or give up 11.43% of portfolio value over 90 days.

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

TEXAS ROADHOUSE  vs.  Gear Energy

TEXAS ROADHOUSE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TEXAS ROADHOUSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gear Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with TEXAS ROADHOUSE and Gear Energy

The main advantage of trading using opposite TEXAS ROADHOUSE and Gear Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TEXAS ROADHOUSE position performs unexpectedly, Gear Energy 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 Gear Energy will offset losses from the drop in Gear Energy's long position.

The idea behind TEXAS ROADHOUSE and Gear Energy 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.