Correlation Between TEXAS ROADHOUSE and KOBE STEEL

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

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

Diversification Opportunities for TEXAS ROADHOUSE and KOBE STEEL

-0.73

Correlation Coefficient

TEXAS ROADHOUSE  KOBE STEEL

Pay attention - limited upside

The 3 months correlation between TEXAS and KOBE is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and KOBE STEEL LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOBE STEEL LTD 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 KOBE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOBE STEEL LTD has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and KOBE STEEL go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and KOBE STEEL

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to under-perform the KOBE STEEL. But the stock apears to be less risky and, when comparing its historical volatility, TEXAS ROADHOUSE is 1.32 times less risky than KOBE STEEL. The stock trades about -0.12 of its potential returns per unit of risk. The KOBE STEEL LTD is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  904.00  in KOBE STEEL LTD on December 20, 2024 and sell it today you would earn a total of  265.00  from holding KOBE STEEL LTD or generate 29.31% 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.  KOBE STEEL LTD

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 fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

KOBE STEEL LTD

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KOBE STEEL LTD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, KOBE STEEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TEXAS ROADHOUSE and KOBE STEEL

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

The idea behind TEXAS ROADHOUSE and KOBE STEEL LTD 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.