Correlation Between TEXAS ROADHOUSE and United States

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

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

Diversification Opportunities for TEXAS ROADHOUSE and United States

0.61

Correlation Coefficient

TEXAS ROADHOUSE  United States

Poor diversification

The 3 months correlation between TEXAS and United is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and United States go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and United States

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 0.68 times more return on investment than United States. However, TEXAS ROADHOUSE is 1.46 times less risky than United States. It trades about -0.1 of its potential returns per unit of risk. United States Steel is currently generating about -0.44 per unit of risk. If you would invest  18,230  in TEXAS ROADHOUSE on September 23, 2024 and sell it today you would lose (770.00) from holding TEXAS ROADHOUSE or give up 4.22% of portfolio value over 90 days.

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

TEXAS ROADHOUSE  vs.  United States Steel

TEXAS ROADHOUSE

Risk-Adjusted Performance

10 of 100

OK

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

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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 United States

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

The idea behind TEXAS ROADHOUSE and United States Steel 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.