Correlation Between TEXAS ROADHOUSE and REINET INVESTMENTS

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

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

Diversification Opportunities for TEXAS ROADHOUSE and REINET INVESTMENTS

0.33

Correlation Coefficient

TEXAS ROADHOUSE  REINET INVESTMENTS

Weak diversification

The 3 months correlation between TEXAS and REINET is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and REINET INVESTMENTS SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REINET INVESTMENTS SCA 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 REINET INVESTMENTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REINET INVESTMENTS SCA has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and REINET INVESTMENTS go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and REINET INVESTMENTS

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 0.62 times more return on investment than REINET INVESTMENTS. However, TEXAS ROADHOUSE is 1.61 times less risky than REINET INVESTMENTS. It trades about -0.06 of its potential returns per unit of risk. REINET INVESTMENTS SCA is currently generating about -0.03 per unit of risk. If you would invest  17,236  in TEXAS ROADHOUSE on December 29, 2024 and sell it today you would lose (1,141) from holding TEXAS ROADHOUSE or give up 6.62% of portfolio value over 90 days.

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

TEXAS ROADHOUSE  vs.  REINET INVESTMENTS SCA

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

REINET INVESTMENTS SCA

Risk-Adjusted Performance

Very Weak

Over the last 90 days REINET INVESTMENTS SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, REINET INVESTMENTS 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 REINET INVESTMENTS

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

The idea behind TEXAS ROADHOUSE and REINET INVESTMENTS SCA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.