Correlation Between Texas Roadhouse and US FOODS

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

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

Diversification Opportunities for Texas Roadhouse and US FOODS

0.82

Correlation Coefficient

Texas Roadhouse  US FOODS

Very poor diversification

The 3 months correlation between Texas and UFH is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and US FOODS HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US FOODS HOLDING 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 US FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US FOODS HOLDING has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and US FOODS go up and down completely randomly.

Pair Corralation between Texas Roadhouse and US FOODS

Assuming the 90 days horizon Texas Roadhouse is expected to under-perform the US FOODS. In addition to that, Texas Roadhouse is 1.68 times more volatile than US FOODS HOLDING. It trades about -0.24 of its total potential returns per unit of risk. US FOODS HOLDING is currently generating about -0.11 per unit of volatility. If you would invest  6,600  in US FOODS HOLDING on October 9, 2024 and sell it today you would lose (100.00) from holding US FOODS HOLDING or give up 1.52% of portfolio value over 90 days.

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

Texas Roadhouse  vs.  US FOODS HOLDING

Texas Roadhouse

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 7 (%) 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.

US FOODS HOLDING

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Texas Roadhouse and US FOODS

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

The idea behind Texas Roadhouse and US FOODS HOLDING 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.