Correlation Between National Bank and Texas Roadhouse
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and Texas Roadhouse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank Holdings and Texas Roadhouse, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Texas Roadhouse.
Diversification Opportunities for National Bank and Texas Roadhouse
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between National and Texas is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Texas Roadhouse go up and down completely randomly.
Pair Corralation between National Bank and Texas Roadhouse
Assuming the 90 days horizon National Bank Holdings is expected to generate 1.61 times more return on investment than Texas Roadhouse. However, National Bank is 1.61 times more volatile than Texas Roadhouse. It trades about 0.17 of its potential returns per unit of risk. Texas Roadhouse is currently generating about 0.24 per unit of risk. If you would invest 4,014 in National Bank Holdings on September 2, 2024 and sell it today you would earn a total of 466.00 from holding National Bank Holdings or generate 11.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank Holdings vs. Texas Roadhouse
Performance |
| Timeline |
| National Bank Holdings |
| Texas Roadhouse |
National Bank and Texas Roadhouse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Texas Roadhouse
The main advantage of trading using opposite National Bank and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. Eagle Materials | National Bank vs. Plastic Omnium | National Bank vs. SANOK RUBBER ZY | National Bank vs. Mitsubishi Materials |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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