Correlation Between Texas Roadhouse and Good Times

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

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

Diversification Opportunities for Texas Roadhouse and Good Times

-0.6

Correlation Coefficient

Texas Roadhouse  Good Times

Excellent diversification

The 3 months correlation between Texas and Good is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Good Times Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Times Restaurants 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 Good Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Times Restaurants has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Good Times go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Good Times

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 0.56 times more return on investment than Good Times. However, Texas Roadhouse is 1.8 times less risky than Good Times. It trades about 0.11 of its potential returns per unit of risk. Good Times Restaurants is currently generating about 0.01 per unit of risk. If you would invest  10,760  in Texas Roadhouse on September 14, 2024 and sell it today you would earn a total of  8,215  from holding Texas Roadhouse or generate 76.35% return on investment over 90 days.

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

Texas Roadhouse  vs.  Good Times Restaurants

Texas Roadhouse

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Texas Roadhouse demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Good Times Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Texas Roadhouse and Good Times

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

The idea behind Texas Roadhouse and Good Times Restaurants 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.