Correlation Between Texas Roadhouse and First CommunityPFD

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

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

Diversification Opportunities for Texas Roadhouse and First CommunityPFD

0.41

Correlation Coefficient

Texas Roadhouse  First CommunityPFD

Very weak diversification

The 3 months correlation between Texas and First is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First CommunityPFD 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 First CommunityPFD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First CommunityPFD has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and First CommunityPFD go up and down completely randomly.

Pair Corralation between Texas Roadhouse and First CommunityPFD

Given the investment horizon of 90 days Texas Roadhouse is expected to under-perform the First CommunityPFD. In addition to that, Texas Roadhouse is 7.59 times more volatile than First Community. It trades about -0.02 of its total potential returns per unit of risk. First Community is currently generating about -0.13 per unit of volatility. If you would invest  940.00  in First Community on December 28, 2024 and sell it today you would lose (15.00) from holding First Community or give up 1.6% of portfolio value over 90 days.

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

Texas Roadhouse  vs.  First Community

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.

First CommunityPFD

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Texas Roadhouse and First CommunityPFD

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

The idea behind Texas Roadhouse and First Community 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.