Correlation Between Texas Roadhouse and Marine Products

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

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

Diversification Opportunities for Texas Roadhouse and Marine Products

0.71

Correlation Coefficient

Texas Roadhouse  Marine Products

Poor diversification

The 3 months correlation between Texas and Marine is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products 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 Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Marine Products go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Marine Products

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 0.75 times more return on investment than Marine Products. However, Texas Roadhouse is 1.33 times less risky than Marine Products. It trades about -0.22 of its potential returns per unit of risk. Marine Products is currently generating about -0.24 per unit of risk. If you would invest  19,320  in Texas Roadhouse on October 11, 2024 and sell it today you would lose (1,115) from holding Texas Roadhouse or give up 5.77% of portfolio value over 90 days.

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

Texas Roadhouse  vs.  Marine Products

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.

Marine Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Texas Roadhouse and Marine Products

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

The idea behind Texas Roadhouse and Marine Products 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..