Correlation Between TEXAS ROADHOUSE and NAGOYA RAILROAD

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

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

Diversification Opportunities for TEXAS ROADHOUSE and NAGOYA RAILROAD

0.59

Correlation Coefficient

TEXAS ROADHOUSE  NAGOYA RAILROAD

Very weak diversification

The 3 months correlation between TEXAS and NAGOYA is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and NAGOYA RAILROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAGOYA RAILROAD 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 NAGOYA RAILROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAGOYA RAILROAD has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and NAGOYA RAILROAD go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and NAGOYA RAILROAD

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 0.88 times more return on investment than NAGOYA RAILROAD. However, TEXAS ROADHOUSE is 1.14 times less risky than NAGOYA RAILROAD. It trades about -0.08 of its potential returns per unit of risk. NAGOYA RAILROAD is currently generating about -0.13 per unit of risk. If you would invest  17,430  in TEXAS ROADHOUSE on October 26, 2024 and sell it today you would lose (270.00) from holding TEXAS ROADHOUSE or give up 1.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

TEXAS ROADHOUSE  vs.  NAGOYA RAILROAD

TEXAS ROADHOUSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TEXAS ROADHOUSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TEXAS ROADHOUSE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

NAGOYA RAILROAD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NAGOYA RAILROAD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NAGOYA RAILROAD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TEXAS ROADHOUSE and NAGOYA RAILROAD

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

The idea behind TEXAS ROADHOUSE and NAGOYA RAILROAD 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.