Correlation Between TEXAS ROADHOUSE and CosmoSteel Holdings

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

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

Diversification Opportunities for TEXAS ROADHOUSE and CosmoSteel Holdings

-0.67

Correlation Coefficient

TEXAS ROADHOUSE  CosmoSteel Holdings

Excellent diversification

The 3 months correlation between TEXAS and CosmoSteel is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and CosmoSteel Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CosmoSteel Holdings 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 CosmoSteel Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CosmoSteel Holdings has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and CosmoSteel Holdings go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and CosmoSteel Holdings

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to under-perform the CosmoSteel Holdings. But the stock apears to be less risky and, when comparing its historical volatility, TEXAS ROADHOUSE is 1.38 times less risky than CosmoSteel Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The CosmoSteel Holdings Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6.60  in CosmoSteel Holdings Limited on December 30, 2024 and sell it today you would earn a total of  1.30  from holding CosmoSteel Holdings Limited or generate 19.7% return on investment over 90 days.

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

TEXAS ROADHOUSE  vs.  CosmoSteel Holdings Limited

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 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.

CosmoSteel Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CosmoSteel Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TEXAS ROADHOUSE and CosmoSteel Holdings

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

The idea behind TEXAS ROADHOUSE and CosmoSteel Holdings Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.