Correlation Between STEEL DYNAMICS and Texas Roadhouse

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

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

Diversification Opportunities for STEEL DYNAMICS and Texas Roadhouse

-0.13

Correlation Coefficient

STEEL DYNAMICS  Texas Roadhouse

Good diversification

The 3 months correlation between STEEL and Texas is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and STEEL DYNAMICS 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 STEEL DYNAMICS 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 STEEL DYNAMICS i.e., STEEL DYNAMICS and Texas Roadhouse go up and down completely randomly.

Pair Corralation between STEEL DYNAMICS and Texas Roadhouse

Assuming the 90 days trading horizon STEEL DYNAMICS is expected to generate 1.12 times more return on investment than Texas Roadhouse. However, STEEL DYNAMICS is 1.12 times more volatile than Texas Roadhouse. It trades about 0.05 of its potential returns per unit of risk. Texas Roadhouse is currently generating about -0.11 per unit of risk. If you would invest  11,055  in STEEL DYNAMICS on December 21, 2024 and sell it today you would earn a total of  521.00  from holding STEEL DYNAMICS or generate 4.71% return on investment over 90 days.

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

STEEL DYNAMICS  vs.  Texas Roadhouse

STEEL DYNAMICS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STEEL DYNAMICS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, STEEL DYNAMICS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with STEEL DYNAMICS and Texas Roadhouse

The main advantage of trading using opposite STEEL DYNAMICS and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL DYNAMICS 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 STEEL DYNAMICS 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.