Correlation Between Texas Roadhouse and Avanos Medical

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

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

Diversification Opportunities for Texas Roadhouse and Avanos Medical

-0.82

Correlation Coefficient

Texas Roadhouse  Avanos Medical

Pay attention - limited upside

The 3 months correlation between Texas and Avanos is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical 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 Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Avanos Medical go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Avanos Medical

Assuming the 90 days horizon Texas Roadhouse is expected to under-perform the Avanos Medical. But the stock apears to be less risky and, when comparing its historical volatility, Texas Roadhouse is 1.39 times less risky than Avanos Medical. The stock trades about -0.1 of its potential returns per unit of risk. The Avanos Medical is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,760  in Avanos Medical on September 16, 2024 and sell it today you would lose (70.00) from holding Avanos Medical or give up 3.98% of portfolio value over 90 days.

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

Texas Roadhouse  vs.  Avanos Medical

Texas Roadhouse

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Texas Roadhouse reported solid returns over the last few months and may actually be approaching a breakup point.

Avanos Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanos Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Texas Roadhouse and Avanos Medical

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

The idea behind Texas Roadhouse and Avanos Medical 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.