Correlation Between TEXAS ROADHOUSE and Transportadora

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

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

Diversification Opportunities for TEXAS ROADHOUSE and Transportadora

0.44

Correlation Coefficient

TEXAS ROADHOUSE  Transportadora

Very weak diversification

The 3 months correlation between TEXAS and Transportadora is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and Transportadora go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and Transportadora

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 8.28 times less return on investment than Transportadora. But when comparing it to its historical volatility, TEXAS ROADHOUSE is 3.15 times less risky than Transportadora. It trades about 0.05 of its potential returns per unit of risk. Transportadora de Gas is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,920  in Transportadora de Gas on October 23, 2024 and sell it today you would earn a total of  780.00  from holding Transportadora de Gas or generate 40.63% return on investment over 90 days.

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

TEXAS ROADHOUSE  vs.  Transportadora de Gas

TEXAS ROADHOUSE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Transportadora de Gas

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TEXAS ROADHOUSE and Transportadora

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

The idea behind TEXAS ROADHOUSE and Transportadora de Gas 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 Stocks Directory module to find actively traded stocks across global markets.