Correlation Between TEXAS ROADHOUSE and Advanced Micro

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

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

Diversification Opportunities for TEXAS ROADHOUSE and Advanced Micro

-0.28

Correlation Coefficient

TEXAS ROADHOUSE  Advanced Micro

Very good diversification

The 3 months correlation between TEXAS and Advanced is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and Advanced Micro go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and Advanced Micro

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to under-perform the Advanced Micro. But the stock apears to be less risky and, when comparing its historical volatility, TEXAS ROADHOUSE is 1.08 times less risky than Advanced Micro. The stock trades about -0.22 of its potential returns per unit of risk. The Advanced Micro Devices is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  12,530  in Advanced Micro Devices on October 8, 2024 and sell it today you would lose (510.00) from holding Advanced Micro Devices or give up 4.07% of portfolio value over 90 days.

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

TEXAS ROADHOUSE  vs.  Advanced Micro Devices

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 February 2025.

Advanced Micro Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Micro Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with TEXAS ROADHOUSE and Advanced Micro

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

The idea behind TEXAS ROADHOUSE and Advanced Micro Devices 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.