Correlation Between Clean Energy and TEXAS ROADHOUSE

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

By analyzing existing cross correlation between Clean Energy Fuels and TEXAS ROADHOUSE, you can compare the effects of market volatilities on Clean Energy 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 Clean Energy with a short position of TEXAS ROADHOUSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Energy and TEXAS ROADHOUSE.

Diversification Opportunities for Clean Energy and TEXAS ROADHOUSE

0.22

Correlation Coefficient

Clean Energy  TEXAS ROADHOUSE

Modest diversification

The 3 months correlation between Clean and TEXAS is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and TEXAS ROADHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TEXAS ROADHOUSE and Clean Energy 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 Clean Energy Fuels 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 Clean Energy i.e., Clean Energy and TEXAS ROADHOUSE go up and down completely randomly.

Pair Corralation between Clean Energy and TEXAS ROADHOUSE

Assuming the 90 days horizon Clean Energy Fuels is expected to under-perform the TEXAS ROADHOUSE. In addition to that, Clean Energy is 2.56 times more volatile than TEXAS ROADHOUSE. It trades about -0.05 of its total potential returns per unit of risk. TEXAS ROADHOUSE is currently generating about 0.0 per unit of volatility. If you would invest  18,344  in TEXAS ROADHOUSE on September 12, 2024 and sell it today you would lose (44.00) from holding TEXAS ROADHOUSE or give up 0.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Clean Energy Fuels  vs.  TEXAS ROADHOUSE

Clean Energy Fuels

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Energy Fuels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Clean Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TEXAS ROADHOUSE

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TEXAS ROADHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clean Energy and TEXAS ROADHOUSE

The main advantage of trading using opposite Clean Energy and TEXAS ROADHOUSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy 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 Clean Energy Fuels 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.