Correlation Between Texas Roadhouse and MGIC Investment

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

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

Diversification Opportunities for Texas Roadhouse and MGIC Investment

-0.04

Correlation Coefficient

Texas Roadhouse  MGIC Investment

Good diversification

The 3 months correlation between Texas and MGIC is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and MGIC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC Investment Corp 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 MGIC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC Investment Corp has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and MGIC Investment go up and down completely randomly.

Pair Corralation between Texas Roadhouse and MGIC Investment

Given the investment horizon of 90 days Texas Roadhouse is expected to under-perform the MGIC Investment. In addition to that, Texas Roadhouse is 1.12 times more volatile than MGIC Investment Corp. It trades about -0.12 of its total potential returns per unit of risk. MGIC Investment Corp is currently generating about -0.06 per unit of volatility. If you would invest  2,479  in MGIC Investment Corp on September 19, 2024 and sell it today you would lose (50.00) from holding MGIC Investment Corp or give up 2.02% of portfolio value over 90 days.

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

Texas Roadhouse  vs.  MGIC Investment Corp

Texas Roadhouse

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 7 (%) 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.

MGIC Investment Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGIC Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MGIC Investment is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Texas Roadhouse and MGIC Investment

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

The idea behind Texas Roadhouse and MGIC Investment Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..