Correlation Between Texas Roadhouse and INTERSHOP Communications

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

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

Diversification Opportunities for Texas Roadhouse and INTERSHOP Communications

-0.69

Correlation Coefficient

Texas Roadhouse  INTERSHOP Communications

Excellent diversification

The 3 months correlation between Texas and INTERSHOP is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and INTERSHOP Communications Aktie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERSHOP Communications 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 INTERSHOP Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERSHOP Communications has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and INTERSHOP Communications go up and down completely randomly.

Pair Corralation between Texas Roadhouse and INTERSHOP Communications

Assuming the 90 days horizon Texas Roadhouse is expected to under-perform the INTERSHOP Communications. But the stock apears to be less risky and, when comparing its historical volatility, Texas Roadhouse is 1.86 times less risky than INTERSHOP Communications. The stock trades about -0.08 of its potential returns per unit of risk. The INTERSHOP Communications Aktiengesellschaft is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  174.00  in INTERSHOP Communications Aktiengesellschaft on December 23, 2024 and sell it today you would earn a total of  19.00  from holding INTERSHOP Communications Aktiengesellschaft or generate 10.92% 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.  INTERSHOP Communications Aktie

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

INTERSHOP Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, INTERSHOP Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Texas Roadhouse and INTERSHOP Communications

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

The idea behind Texas Roadhouse and INTERSHOP Communications Aktiengesellschaft 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.