Correlation Between TEXAS ROADHOUSE and Mitie Group

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

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

Diversification Opportunities for TEXAS ROADHOUSE and Mitie Group

0.46

Correlation Coefficient

TEXAS ROADHOUSE  Mitie Group

Very weak diversification

The 3 months correlation between TEXAS and Mitie is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC 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 Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and Mitie Group go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and Mitie Group

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to under-perform the Mitie Group. But the stock apears to be less risky and, when comparing its historical volatility, TEXAS ROADHOUSE is 1.03 times less risky than Mitie Group. The stock trades about -0.06 of its potential returns per unit of risk. The Mitie Group PLC is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  117,700  in Mitie Group PLC on December 28, 2024 and sell it today you would lose (7,150) from holding Mitie Group PLC or give up 6.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

TEXAS ROADHOUSE  vs.  Mitie Group PLC

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.

Mitie Group PLC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with TEXAS ROADHOUSE and Mitie Group

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

The idea behind TEXAS ROADHOUSE and Mitie Group PLC 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.