Correlation Between Texas Roadhouse and Progressive

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

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

Diversification Opportunities for Texas Roadhouse and Progressive

-0.6

Correlation Coefficient

Texas Roadhouse  Progressive

Excellent diversification

The 3 months correlation between Texas and Progressive is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and The Progressive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive 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 Progressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Progressive has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Progressive go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Progressive

Assuming the 90 days horizon Texas Roadhouse is expected to under-perform the Progressive. In addition to that, Texas Roadhouse is 1.12 times more volatile than The Progressive. It trades about -0.09 of its total potential returns per unit of risk. The Progressive is currently generating about 0.11 per unit of volatility. If you would invest  22,705  in The Progressive on December 22, 2024 and sell it today you would earn a total of  2,510  from holding The Progressive or generate 11.05% 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.  The Progressive

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 fragile 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.

Progressive

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Progressive are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Progressive may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Texas Roadhouse and Progressive

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

The idea behind Texas Roadhouse and The Progressive 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.