Correlation Between Texas Roadhouse and Highway Holdings

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

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

Diversification Opportunities for Texas Roadhouse and Highway Holdings

0.15

Correlation Coefficient

Texas Roadhouse  Highway Holdings

Average diversification

The 3 months correlation between Texas and Highway is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings 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 Highway Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway Holdings has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Highway Holdings go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Highway Holdings

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 0.51 times more return on investment than Highway Holdings. However, Texas Roadhouse is 1.96 times less risky than Highway Holdings. It trades about 0.11 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.01 per unit of risk. If you would invest  8,782  in Texas Roadhouse on September 20, 2024 and sell it today you would earn a total of  9,504  from holding Texas Roadhouse or generate 108.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Texas Roadhouse  vs.  Highway Holdings Limited

Texas Roadhouse

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Texas Roadhouse may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Highway Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Highway Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Texas Roadhouse and Highway Holdings

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

The idea behind Texas Roadhouse and Highway Holdings Limited 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.