Correlation Between Texas Roadhouse and TRAINLINE PLC

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

By analyzing existing cross correlation between Texas Roadhouse and TRAINLINE PLC LS, you can compare the effects of market volatilities on Texas Roadhouse and TRAINLINE PLC 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 TRAINLINE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Roadhouse and TRAINLINE PLC.

Diversification Opportunities for Texas Roadhouse and TRAINLINE PLC

0.64

Correlation Coefficient

Texas Roadhouse  TRAINLINE PLC

Poor diversification

The 3 months correlation between Texas and TRAINLINE is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and TRAINLINE PLC LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAINLINE PLC LS 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 TRAINLINE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAINLINE PLC LS has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and TRAINLINE PLC go up and down completely randomly.

Pair Corralation between Texas Roadhouse and TRAINLINE PLC

Assuming the 90 days horizon Texas Roadhouse is expected to generate 0.77 times more return on investment than TRAINLINE PLC. However, Texas Roadhouse is 1.29 times less risky than TRAINLINE PLC. It trades about -0.05 of its potential returns per unit of risk. TRAINLINE PLC LS is currently generating about -0.22 per unit of risk. If you would invest  17,300  in Texas Roadhouse on November 29, 2024 and sell it today you would lose (455.00) from holding Texas Roadhouse or give up 2.63% 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.  TRAINLINE PLC LS

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. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

TRAINLINE PLC LS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Texas Roadhouse and TRAINLINE PLC

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

The idea behind Texas Roadhouse and TRAINLINE PLC LS 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.