Correlation Between Texas Roadhouse and Capital Clean

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

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

Diversification Opportunities for Texas Roadhouse and Capital Clean

-0.37

Correlation Coefficient

Texas Roadhouse  Capital Clean

Very good diversification

The 3 months correlation between Texas and Capital is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Capital Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Clean Energy 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 Capital Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Clean Energy has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Capital Clean go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Capital Clean

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 1.48 times less return on investment than Capital Clean. But when comparing it to its historical volatility, Texas Roadhouse is 1.24 times less risky than Capital Clean. It trades about 0.05 of its potential returns per unit of risk. Capital Clean Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,810  in Capital Clean Energy on December 5, 2024 and sell it today you would earn a total of  59.00  from holding Capital Clean Energy or generate 3.26% return on investment over 90 days.

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

Texas Roadhouse  vs.  Capital Clean Energy

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 fairly strong basic indicators, Texas Roadhouse is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Capital Clean Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Clean Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Capital Clean is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Texas Roadhouse and Capital Clean

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

The idea behind Texas Roadhouse and Capital Clean Energy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.