Correlation Between Texas Roadhouse and KINDER

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

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

Diversification Opportunities for Texas Roadhouse and KINDER

-0.47

Correlation Coefficient

Texas Roadhouse  KINDER

Very good diversification

The 3 months correlation between Texas and KINDER is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and KINDER MORGAN INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN INC 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN INC has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and KINDER go up and down completely randomly.

Pair Corralation between Texas Roadhouse and KINDER

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 0.9 times more return on investment than KINDER. However, Texas Roadhouse is 1.11 times less risky than KINDER. It trades about -0.05 of its potential returns per unit of risk. KINDER MORGAN INC is currently generating about -0.1 per unit of risk. If you would invest  17,971  in Texas Roadhouse on December 23, 2024 and sell it today you would lose (983.00) from holding Texas Roadhouse or give up 5.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.44%
Values	Daily Returns

Texas Roadhouse  vs.  KINDER MORGAN INC

Texas Roadhouse

Risk-Adjusted Performance

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.

KINDER MORGAN INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days KINDER MORGAN INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KINDER MORGAN INC investors.

Pair Trading with Texas Roadhouse and KINDER

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

The idea behind Texas Roadhouse and KINDER MORGAN INC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.