Correlation Between TEXAS ROADHOUSE and Liberty Broadband

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

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

Diversification Opportunities for TEXAS ROADHOUSE and Liberty Broadband

0.55

Correlation Coefficient

TEXAS ROADHOUSE  Liberty Broadband

Very weak diversification

The 3 months correlation between TEXAS and Liberty is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband 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 Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and Liberty Broadband go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and Liberty Broadband

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to under-perform the Liberty Broadband. But the stock apears to be less risky and, when comparing its historical volatility, TEXAS ROADHOUSE is 1.79 times less risky than Liberty Broadband. The stock trades about 0.0 of its potential returns per unit of risk. The Liberty Broadband is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,500  in Liberty Broadband on October 26, 2024 and sell it today you would lose (150.00) from holding Liberty Broadband or give up 2.0% of portfolio value over 90 days.

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

TEXAS ROADHOUSE  vs.  Liberty Broadband

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. 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.

Liberty Broadband

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Broadband has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Liberty Broadband is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TEXAS ROADHOUSE and Liberty Broadband

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

The idea behind TEXAS ROADHOUSE and Liberty Broadband 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.