Correlation Between Texas Roadhouse and BII Railway

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

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

Diversification Opportunities for Texas Roadhouse and BII Railway

-0.67

Correlation Coefficient

Texas Roadhouse  BII Railway

Excellent diversification

The 3 months correlation between Texas and BII is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor 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 BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and BII Railway go up and down completely randomly.

Pair Corralation between Texas Roadhouse and BII Railway

Assuming the 90 days horizon Texas Roadhouse is expected to under-perform the BII Railway. But the stock apears to be less risky and, when comparing its historical volatility, Texas Roadhouse is 1.21 times less risky than BII Railway. The stock trades about -0.38 of its potential returns per unit of risk. The BII Railway Transportation is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2.60  in BII Railway Transportation on October 5, 2024 and sell it today you would earn a total of  0.20  from holding BII Railway Transportation or generate 7.69% return on investment over 90 days.

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

Texas Roadhouse  vs.  BII Railway Transportation

Texas Roadhouse

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Texas Roadhouse has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Texas Roadhouse may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BII Railway Transpor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Texas Roadhouse and BII Railway

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

The idea behind Texas Roadhouse and BII Railway Transportation 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.