Correlation Between Texas Roadhouse and China Power

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

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

Diversification Opportunities for Texas Roadhouse and China Power

0.0

Correlation Coefficient

Texas Roadhouse  China Power

Pay attention - limited upside

The 3 months correlation between Texas and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and China Power Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Power Equipment 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 China Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Power Equipment has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and China Power go up and down completely randomly.

Pair Corralation between Texas Roadhouse and China Power

If you would invest  0.52  in China Power Equipment on October 12, 2024 and sell it today you would earn a total of  0.00  from holding China Power Equipment or generate 0.0% return on investment over 90 days.

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

Texas Roadhouse  vs.  China Power Equipment

Texas Roadhouse

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

China Power Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Power Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, China Power is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Texas Roadhouse and China Power

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

The idea behind Texas Roadhouse and China Power Equipment 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.