Correlation Between TEXAS ROADHOUSE and SUN ART

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

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

Diversification Opportunities for TEXAS ROADHOUSE and SUN ART

0.22

Correlation Coefficient

TEXAS ROADHOUSE  SUN ART

Modest diversification

The 3 months correlation between TEXAS and SUN is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and SUN ART RETAIL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUN ART RETAIL 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 SUN ART. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUN ART RETAIL has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and SUN ART go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and SUN ART

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 25.88 times less return on investment than SUN ART. But when comparing it to its historical volatility, TEXAS ROADHOUSE is 10.56 times less risky than SUN ART. It trades about 0.06 of its potential returns per unit of risk. SUN ART RETAIL is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  11.00  in SUN ART RETAIL on October 6, 2024 and sell it today you would earn a total of  11.00  from holding SUN ART RETAIL or generate 100.0% return on investment over 90 days.

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

TEXAS ROADHOUSE  vs.  SUN ART RETAIL

TEXAS ROADHOUSE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TEXAS ROADHOUSE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SUN ART RETAIL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SUN ART RETAIL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, SUN ART exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TEXAS ROADHOUSE and SUN ART

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

The idea behind TEXAS ROADHOUSE and SUN ART RETAIL 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.