Correlation Between TEXAS ROADHOUSE and POSCO Holdings

Can any of the company-specific risk be diversified away by investing in both TEXAS ROADHOUSE and POSCO 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 POSCO 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 POSCO Holdings, you can compare the effects of market volatilities on TEXAS ROADHOUSE and POSCO 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 POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of TEXAS ROADHOUSE and POSCO Holdings.

Diversification Opportunities for TEXAS ROADHOUSE and POSCO Holdings

-0.81

Correlation Coefficient

TEXAS ROADHOUSE  POSCO Holdings

Pay attention - limited upside

The 3 months correlation between TEXAS and POSCO is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO 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 POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and POSCO Holdings go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and POSCO Holdings

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 0.72 times more return on investment than POSCO Holdings. However, TEXAS ROADHOUSE is 1.39 times less risky than POSCO Holdings. It trades about 0.04 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.08 per unit of risk. If you would invest  16,141  in TEXAS ROADHOUSE on September 26, 2024 and sell it today you would earn a total of  1,284  from holding TEXAS ROADHOUSE or generate 7.95% return on investment over 90 days.

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

TEXAS ROADHOUSE  vs.  POSCO Holdings

TEXAS ROADHOUSE

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 6 (%) 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 January 2025.

POSCO Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POSCO Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with TEXAS ROADHOUSE and POSCO Holdings

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

The idea behind TEXAS ROADHOUSE and POSCO Holdings 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.