Correlation Between Texas Roadhouse and FedEx Corp

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

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

Diversification Opportunities for Texas Roadhouse and FedEx Corp

0.73

Correlation Coefficient

Texas Roadhouse  FedEx Corp

Poor diversification

The 3 months correlation between Texas and FedEx is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and FedEx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx Corp 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 FedEx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx Corp has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and FedEx Corp go up and down completely randomly.

Pair Corralation between Texas Roadhouse and FedEx Corp

Assuming the 90 days horizon Texas Roadhouse is expected to generate 0.93 times more return on investment than FedEx Corp. However, Texas Roadhouse is 1.08 times less risky than FedEx Corp. It trades about 0.06 of its potential returns per unit of risk. FedEx Corp is currently generating about 0.05 per unit of risk. If you would invest  16,496  in Texas Roadhouse on October 25, 2024 and sell it today you would earn a total of  1,029  from holding Texas Roadhouse or generate 6.24% return on investment over 90 days.

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

Texas Roadhouse  vs.  FedEx Corp

Texas Roadhouse

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Texas Roadhouse may actually be approaching a critical reversion point that can send shares even higher in February 2025.

FedEx Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, FedEx Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Texas Roadhouse and FedEx Corp

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

The idea behind Texas Roadhouse and FedEx Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.