Correlation Between Texas Roadhouse and Media

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

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

Diversification Opportunities for Texas Roadhouse and Media

0.55

Correlation Coefficient

Texas Roadhouse  Media

Very weak diversification

The 3 months correlation between Texas and Media is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Media and Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media and Games 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 Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media and Games has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Media go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Media

Assuming the 90 days horizon Texas Roadhouse is expected to generate 0.43 times more return on investment than Media. However, Texas Roadhouse is 2.3 times less risky than Media. It trades about -0.35 of its potential returns per unit of risk. Media and Games is currently generating about -0.38 per unit of risk. If you would invest  18,858  in Texas Roadhouse on October 5, 2024 and sell it today you would lose (1,468) from holding Texas Roadhouse or give up 7.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Texas Roadhouse  vs.  Media and Games

Texas Roadhouse

Risk-Adjusted Performance

0 of 100

Modest

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.

Media and Games

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Texas Roadhouse and Media

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

The idea behind Texas Roadhouse and Media and Games 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.