Correlation Between APPLIED MATERIALS and Texas Roadhouse
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS 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 APPLIED MATERIALS and Texas Roadhouse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Texas Roadhouse, you can compare the effects of market volatilities on APPLIED MATERIALS 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 APPLIED MATERIALS with a short position of Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Texas Roadhouse.
Diversification Opportunities for APPLIED MATERIALS and Texas Roadhouse
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between APPLIED and Texas is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and Texas Roadhouse go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Texas Roadhouse
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 27.72 times less return on investment than Texas Roadhouse. In addition to that, APPLIED MATERIALS is 1.3 times more volatile than Texas Roadhouse. It trades about 0.01 of its total potential returns per unit of risk. Texas Roadhouse is currently generating about 0.2 per unit of volatility. If you would invest 17,665 in Texas Roadhouse on September 1, 2024 and sell it today you would earn a total of 1,570 from holding Texas Roadhouse or generate 8.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Texas Roadhouse
Performance |
| Timeline |
| APPLIED MATERIALS |
| Texas Roadhouse |
APPLIED MATERIALS and Texas Roadhouse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Texas Roadhouse
The main advantage of trading using opposite APPLIED MATERIALS and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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.| APPLIED MATERIALS vs. QBE Insurance Group | APPLIED MATERIALS vs. Selective Insurance Group | APPLIED MATERIALS vs. Singapore Reinsurance | APPLIED MATERIALS vs. United Natural Foods |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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