Correlation Between Tianjin Capital and Texas Roadhouse

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

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

Diversification Opportunities for Tianjin Capital and Texas Roadhouse

0.15

Correlation Coefficient

Tianjin Capital  Texas Roadhouse

Average diversification

The 3 months correlation between Tianjin and Texas is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and Tianjin Capital 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 Tianjin Capital Environmental 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 Tianjin Capital i.e., Tianjin Capital and Texas Roadhouse go up and down completely randomly.

Pair Corralation between Tianjin Capital and Texas Roadhouse

Assuming the 90 days horizon Tianjin Capital Environmental is expected to generate 3.25 times more return on investment than Texas Roadhouse. However, Tianjin Capital is 3.25 times more volatile than Texas Roadhouse. It trades about 0.07 of its potential returns per unit of risk. Texas Roadhouse is currently generating about 0.09 per unit of risk. If you would invest  11.00  in Tianjin Capital Environmental on October 25, 2024 and sell it today you would earn a total of  27.00  from holding Tianjin Capital Environmental or generate 245.45% return on investment over 90 days.

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

Tianjin Capital Environmental  vs.  Texas Roadhouse

Tianjin Capital Envi

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tianjin Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Texas Roadhouse

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 4 (%) 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.

Pair Trading with Tianjin Capital and Texas Roadhouse

The main advantage of trading using opposite Tianjin Capital and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tianjin Capital 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 Tianjin Capital Environmental 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.