Correlation Between Texas Roadhouse and TRAVEL +

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

By analyzing existing cross correlation between Texas Roadhouse and TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on Texas Roadhouse and TRAVEL + 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 TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Roadhouse and TRAVEL +.

Diversification Opportunities for Texas Roadhouse and TRAVEL +

0.93

Correlation Coefficient

Texas Roadhouse  TRAVEL +

Almost no diversification

The 3 months correlation between Texas and TRAVEL is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL 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 TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and TRAVEL + go up and down completely randomly.

Pair Corralation between Texas Roadhouse and TRAVEL +

Assuming the 90 days horizon Texas Roadhouse is expected to under-perform the TRAVEL +. In addition to that, Texas Roadhouse is 1.17 times more volatile than TRAVEL LEISURE DL 01. It trades about -0.38 of its total potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about -0.39 per unit of volatility. If you would invest  5,199  in TRAVEL LEISURE DL 01 on October 5, 2024 and sell it today you would lose (379.00) from holding TRAVEL LEISURE DL 01 or give up 7.29% of portfolio value over 90 days.

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

Texas Roadhouse  vs.  TRAVEL LEISURE DL 01

Texas Roadhouse

Risk-Adjusted Performance

0 of 100

OK

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.

TRAVEL LEISURE DL

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Texas Roadhouse and TRAVEL +

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

The idea behind Texas Roadhouse and TRAVEL LEISURE DL 01 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.