Correlation Between Texas Roadhouse and NEWELL RUBBERMAID

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

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

Diversification Opportunities for Texas Roadhouse and NEWELL RUBBERMAID

0.78

Correlation Coefficient

Texas Roadhouse  NEWELL RUBBERMAID

Poor diversification

The 3 months correlation between Texas and NEWELL is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and NEWELL RUBBERMAID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEWELL RUBBERMAID 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 NEWELL RUBBERMAID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEWELL RUBBERMAID has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and NEWELL RUBBERMAID go up and down completely randomly.

Pair Corralation between Texas Roadhouse and NEWELL RUBBERMAID

Assuming the 90 days horizon Texas Roadhouse is expected to under-perform the NEWELL RUBBERMAID. But the stock apears to be less risky and, when comparing its historical volatility, Texas Roadhouse is 2.23 times less risky than NEWELL RUBBERMAID. The stock trades about -0.29 of its potential returns per unit of risk. The NEWELL RUBBERMAID is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  894.00  in NEWELL RUBBERMAID on September 29, 2024 and sell it today you would earn a total of  76.00  from holding NEWELL RUBBERMAID or generate 8.5% 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.  NEWELL RUBBERMAID

Texas Roadhouse

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Texas Roadhouse reported solid returns over the last few months and may actually be approaching a breakup point.

NEWELL RUBBERMAID

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEWELL RUBBERMAID are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, NEWELL RUBBERMAID unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Texas Roadhouse and NEWELL RUBBERMAID

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

The idea behind Texas Roadhouse and NEWELL RUBBERMAID 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.