Correlation Between Texas Roadhouse and AUTONATION

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

By analyzing existing cross correlation between Texas Roadhouse and AUTONATION INC 38, you can compare the effects of market volatilities on Texas Roadhouse and AUTONATION 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 AUTONATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Roadhouse and AUTONATION.

Diversification Opportunities for Texas Roadhouse and AUTONATION

0.37

Correlation Coefficient

Texas Roadhouse  AUTONATION

Weak diversification

The 3 months correlation between Texas and AUTONATION is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and AUTONATION INC 38 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTONATION INC 38 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 AUTONATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTONATION INC 38 has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and AUTONATION go up and down completely randomly.

Pair Corralation between Texas Roadhouse and AUTONATION

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 2.29 times more return on investment than AUTONATION. However, Texas Roadhouse is 2.29 times more volatile than AUTONATION INC 38. It trades about -0.03 of its potential returns per unit of risk. AUTONATION INC 38 is currently generating about -0.07 per unit of risk. If you would invest  18,679  in Texas Roadhouse on October 25, 2024 and sell it today you would lose (675.00) from holding Texas Roadhouse or give up 3.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.33%
Values	Daily Returns

Texas Roadhouse  vs.  AUTONATION INC 38

Texas Roadhouse

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Texas Roadhouse has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

AUTONATION INC 38

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTONATION INC 38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AUTONATION is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Texas Roadhouse and AUTONATION

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

The idea behind Texas Roadhouse and AUTONATION INC 38 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.