Correlation Between Texas Roadhouse and CHINA STATE

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

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

Diversification Opportunities for Texas Roadhouse and CHINA STATE

-0.45

Correlation Coefficient

Texas Roadhouse  CHINA STATE

Very good diversification

The 3 months correlation between Texas and CHINA is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and CHINA STATE STRU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA STATE STRU 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 CHINA STATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA STATE STRU has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and CHINA STATE go up and down completely randomly.

Pair Corralation between Texas Roadhouse and CHINA STATE

Assuming the 90 days horizon Texas Roadhouse is expected to under-perform the CHINA STATE. In addition to that, Texas Roadhouse is 4.98 times more volatile than CHINA STATE STRU. It trades about -0.11 of its total potential returns per unit of risk. CHINA STATE STRU is currently generating about -0.16 per unit of volatility. If you would invest  138.00  in CHINA STATE STRU on October 26, 2024 and sell it today you would lose (3.00) from holding CHINA STATE STRU or give up 2.17% of portfolio value over 90 days.

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

Texas Roadhouse  vs.  CHINA STATE STRU

Texas Roadhouse

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Texas Roadhouse has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Texas Roadhouse is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CHINA STATE STRU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA STATE STRU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CHINA STATE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Texas Roadhouse and CHINA STATE

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

The idea behind Texas Roadhouse and CHINA STATE STRU 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.