Correlation Between TRAVEL + and Texas Roadhouse

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and Texas Roadhouse, you can compare the effects of market volatilities on TRAVEL + and Texas Roadhouse 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 TRAVEL + with a short position of Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and Texas Roadhouse.

Diversification Opportunities for TRAVEL + and Texas Roadhouse

0.93

Correlation Coefficient

TRAVEL +  Texas Roadhouse

Almost no diversification

The 3 months correlation between TRAVEL and Texas is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and TRAVEL + 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 TRAVEL LEISURE DL 01 are associated (or correlated) with Texas Roadhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Roadhouse has no effect on the direction of TRAVEL + i.e., TRAVEL + and Texas Roadhouse go up and down completely randomly.

Pair Corralation between TRAVEL + and Texas Roadhouse

Assuming the 90 days trading horizon TRAVEL + is expected to generate 1.39 times less return on investment than Texas Roadhouse. In addition to that, TRAVEL + is 1.07 times more volatile than Texas Roadhouse. It trades about 0.08 of its total potential returns per unit of risk. Texas Roadhouse is currently generating about 0.12 per unit of volatility. If you would invest  10,745  in Texas Roadhouse on October 5, 2024 and sell it today you would earn a total of  6,555  from holding Texas Roadhouse or generate 61.01% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Texas Roadhouse

TRAVEL LEISURE DL

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Texas Roadhouse

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Texas Roadhouse has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Texas Roadhouse may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TRAVEL + and Texas Roadhouse

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

The idea behind TRAVEL LEISURE DL 01 and Texas Roadhouse 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.