Correlation Between PACCAR and Texas Roadhouse
Can any of the company-specific risk be diversified away by investing in both PACCAR 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 PACCAR and Texas Roadhouse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PACCAR Inc and Texas Roadhouse, you can compare the effects of market volatilities on PACCAR 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 PACCAR with a short position of Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and Texas Roadhouse.
Diversification Opportunities for PACCAR and Texas Roadhouse
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PACCAR and Texas is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and PACCAR 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 PACCAR Inc 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 PACCAR i.e., PACCAR and Texas Roadhouse go up and down completely randomly.
Pair Corralation between PACCAR and Texas Roadhouse
Given the investment horizon of 90 days PACCAR Inc is expected to generate 1.21 times more return on investment than Texas Roadhouse. However, PACCAR is 1.21 times more volatile than Texas Roadhouse. It trades about 0.24 of its potential returns per unit of risk. Texas Roadhouse is currently generating about 0.15 per unit of risk. If you would invest 10,455 in PACCAR Inc on September 4, 2024 and sell it today you would earn a total of 1,169 from holding PACCAR Inc or generate 11.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PACCAR Inc vs. Texas Roadhouse
Performance |
| Timeline |
| PACCAR Inc |
| Texas Roadhouse |
PACCAR and Texas Roadhouse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PACCAR and Texas Roadhouse
The main advantage of trading using opposite PACCAR and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR 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 PACCAR Inc 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.| Texas Roadhouse vs. Brinker International | Texas Roadhouse vs. BJs Restaurants | Texas Roadhouse vs. Papa Johns International | Texas Roadhouse vs. Bloomin Brands |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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