Correlation Between TEXAS ROADHOUSE and PT Indofood

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Can any of the company-specific risk be diversified away by investing in both TEXAS ROADHOUSE and PT Indofood 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 PT Indofood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TEXAS ROADHOUSE and PT Indofood Sukses, you can compare the effects of market volatilities on TEXAS ROADHOUSE and PT Indofood 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 PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of TEXAS ROADHOUSE and PT Indofood.

Diversification Opportunities for TEXAS ROADHOUSE and PT Indofood

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between TEXAS and ISM is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses 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 PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and PT Indofood go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and PT Indofood

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 2.95 times less return on investment than PT Indofood. But when comparing it to its historical volatility, TEXAS ROADHOUSE is 2.18 times less risky than PT Indofood. It trades about 0.06 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  34.00  in PT Indofood Sukses on September 20, 2024 and sell it today you would earn a total of  12.00  from holding PT Indofood Sukses or generate 35.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

TEXAS ROADHOUSE  vs.  PT Indofood Sukses

 Performance 
       Timeline  
TEXAS ROADHOUSE 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TEXAS ROADHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.
PT Indofood Sukses 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, PT Indofood reported solid returns over the last few months and may actually be approaching a breakup point.

TEXAS ROADHOUSE and PT Indofood Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TEXAS ROADHOUSE and PT Indofood

The main advantage of trading using opposite TEXAS ROADHOUSE and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TEXAS ROADHOUSE position performs unexpectedly, PT Indofood 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 PT Indofood will offset losses from the drop in PT Indofood's long position.
The idea behind TEXAS ROADHOUSE and PT Indofood Sukses 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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