Correlation Between Texas Roadhouse and Sea

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

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

Diversification Opportunities for Texas Roadhouse and Sea

0.45

Correlation Coefficient

Texas Roadhouse  Sea

Very weak diversification

The 3 months correlation between Texas and Sea is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Sea go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Sea

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 0.76 times more return on investment than Sea. However, Texas Roadhouse is 1.32 times less risky than Sea. It trades about -0.18 of its potential returns per unit of risk. Sea is currently generating about -0.21 per unit of risk. If you would invest  19,181  in Texas Roadhouse on October 8, 2024 and sell it today you would lose (887.00) from holding Texas Roadhouse or give up 4.62% of portfolio value over 90 days.

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

Texas Roadhouse  vs.  Sea

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.

Sea

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Texas Roadhouse and Sea

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

The idea behind Texas Roadhouse and Sea 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.