Correlation Between Texas Roadhouse and Nishi-Nippon Railroad

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

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

Diversification Opportunities for Texas Roadhouse and Nishi-Nippon Railroad

0.09

Correlation Coefficient

Texas Roadhouse  Nishi-Nippon Railroad

Significant diversification

The 3 months correlation between Texas and Nishi-Nippon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Nishi Nippon Railroad Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nishi Nippon Railroad 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 Nishi-Nippon Railroad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nishi Nippon Railroad has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Nishi-Nippon Railroad go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Nishi-Nippon Railroad

Assuming the 90 days horizon Texas Roadhouse is expected to generate 0.53 times more return on investment than Nishi-Nippon Railroad. However, Texas Roadhouse is 1.87 times less risky than Nishi-Nippon Railroad. It trades about 0.14 of its potential returns per unit of risk. Nishi Nippon Railroad Co is currently generating about 0.05 per unit of risk. If you would invest  9,458  in Texas Roadhouse on October 8, 2024 and sell it today you would earn a total of  8,137  from holding Texas Roadhouse or generate 86.03% return on investment over 90 days.

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

Texas Roadhouse  vs.  Nishi Nippon Railroad Co

Texas Roadhouse

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 8 (%) 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.

Nishi Nippon Railroad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nishi Nippon Railroad Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nishi-Nippon Railroad is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Texas Roadhouse and Nishi-Nippon Railroad

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

The idea behind Texas Roadhouse and Nishi Nippon Railroad Co 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.