Correlation Between SAFETY MEDICAL and TEXAS ROADHOUSE

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

By analyzing existing cross correlation between SAFETY MEDICAL PROD and TEXAS ROADHOUSE, you can compare the effects of market volatilities on SAFETY MEDICAL and TEXAS ROADHOUSE 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 SAFETY MEDICAL with a short position of TEXAS ROADHOUSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAFETY MEDICAL and TEXAS ROADHOUSE.

Diversification Opportunities for SAFETY MEDICAL and TEXAS ROADHOUSE

-0.86

Correlation Coefficient

SAFETY MEDICAL  TEXAS ROADHOUSE

Pay attention - limited upside

The 3 months correlation between SAFETY and TEXAS is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding SAFETY MEDICAL PROD and TEXAS ROADHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TEXAS ROADHOUSE and SAFETY MEDICAL 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 SAFETY MEDICAL PROD are associated (or correlated) with TEXAS ROADHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TEXAS ROADHOUSE has no effect on the direction of SAFETY MEDICAL i.e., SAFETY MEDICAL and TEXAS ROADHOUSE go up and down completely randomly.

Pair Corralation between SAFETY MEDICAL and TEXAS ROADHOUSE

Assuming the 90 days trading horizon SAFETY MEDICAL PROD is expected to under-perform the TEXAS ROADHOUSE. In addition to that, SAFETY MEDICAL is 1.58 times more volatile than TEXAS ROADHOUSE. It trades about -0.21 of its total potential returns per unit of risk. TEXAS ROADHOUSE is currently generating about 0.22 per unit of volatility. If you would invest  15,074  in TEXAS ROADHOUSE on September 3, 2024 and sell it today you would earn a total of  4,131  from holding TEXAS ROADHOUSE or generate 27.4% return on investment over 90 days.

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

SAFETY MEDICAL PROD  vs.  TEXAS ROADHOUSE

SAFETY MEDICAL PROD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAFETY MEDICAL PROD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

TEXAS ROADHOUSE

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TEXAS ROADHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAFETY MEDICAL and TEXAS ROADHOUSE

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

The idea behind SAFETY MEDICAL PROD and TEXAS ROADHOUSE 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.