Correlation Between TEXAS ROADHOUSE and Raytheon Technologies

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

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

Diversification Opportunities for TEXAS ROADHOUSE and Raytheon Technologies

-0.26

Correlation Coefficient

TEXAS ROADHOUSE  Raytheon Technologies

Very good diversification

The 3 months correlation between TEXAS and Raytheon is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and Raytheon Technologies go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and Raytheon Technologies

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to under-perform the Raytheon Technologies. In addition to that, TEXAS ROADHOUSE is 1.18 times more volatile than Raytheon Technologies Corp. It trades about -0.09 of its total potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.14 per unit of volatility. If you would invest  11,097  in Raytheon Technologies Corp on December 21, 2024 and sell it today you would earn a total of  1,301  from holding Raytheon Technologies Corp or generate 11.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

TEXAS ROADHOUSE  vs.  Raytheon Technologies Corp

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. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Raytheon Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Raytheon Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TEXAS ROADHOUSE and Raytheon Technologies

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

The idea behind TEXAS ROADHOUSE and Raytheon Technologies Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.