Correlation Between Texas Roadhouse and GOLD ROAD

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

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

Diversification Opportunities for Texas Roadhouse and GOLD ROAD

-0.76

Correlation Coefficient

Texas Roadhouse  GOLD ROAD

Pay attention - limited upside

The 3 months correlation between Texas and GOLD is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and GOLD ROAD RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLD ROAD RES 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 GOLD ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLD ROAD RES has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and GOLD ROAD go up and down completely randomly.

Pair Corralation between Texas Roadhouse and GOLD ROAD

Assuming the 90 days horizon Texas Roadhouse is expected to under-perform the GOLD ROAD. But the stock apears to be less risky and, when comparing its historical volatility, Texas Roadhouse is 1.27 times less risky than GOLD ROAD. The stock trades about -0.11 of its potential returns per unit of risk. The GOLD ROAD RES is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  113.00  in GOLD ROAD RES on November 29, 2024 and sell it today you would earn a total of  36.00  from holding GOLD ROAD RES or generate 31.86% 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.  GOLD ROAD RES

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.

GOLD ROAD RES

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Texas Roadhouse and GOLD ROAD

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

The idea behind Texas Roadhouse and GOLD ROAD RES 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.