Correlation Between Texas Roadhouse and Papa Johns

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

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

Diversification Opportunities for Texas Roadhouse and Papa Johns

0.53

Correlation Coefficient

Texas Roadhouse  Papa Johns

Very weak diversification

The 3 months correlation between Texas and Papa is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Papa Johns International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papa Johns International 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 Papa Johns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papa Johns International has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Papa Johns go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Papa Johns

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 0.68 times more return on investment than Papa Johns. However, Texas Roadhouse is 1.47 times less risky than Papa Johns. It trades about 0.09 of its potential returns per unit of risk. Papa Johns International is currently generating about -0.07 per unit of risk. If you would invest  11,049  in Texas Roadhouse on October 24, 2024 and sell it today you would earn a total of  7,155  from holding Texas Roadhouse or generate 64.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.74%
Values	Daily Returns

Texas Roadhouse  vs.  Papa Johns International

Texas Roadhouse

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 1 (%) 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.

Papa Johns International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Papa Johns International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Texas Roadhouse and Papa Johns

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

The idea behind Texas Roadhouse and Papa Johns International 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.