Correlation Between TEXAS ROADHOUSE and Prestige Consumer
Can any of the company-specific risk be diversified away by investing in both TEXAS ROADHOUSE and Prestige Consumer 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 TEXAS ROADHOUSE and Prestige Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TEXAS ROADHOUSE and Prestige Consumer Healthcare, you can compare the effects of market volatilities on TEXAS ROADHOUSE and Prestige Consumer 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 TEXAS ROADHOUSE with a short position of Prestige Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of TEXAS ROADHOUSE and Prestige Consumer.
Diversification Opportunities for TEXAS ROADHOUSE and Prestige Consumer
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TEXAS and Prestige is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and Prestige Consumer Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Consumer and TEXAS ROADHOUSE 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 TEXAS ROADHOUSE are associated (or correlated) with Prestige Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prestige Consumer has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and Prestige Consumer go up and down completely randomly.
Pair Corralation between TEXAS ROADHOUSE and Prestige Consumer
Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 1.07 times more return on investment than Prestige Consumer. However, TEXAS ROADHOUSE is 1.07 times more volatile than Prestige Consumer Healthcare. It trades about 0.14 of its potential returns per unit of risk. Prestige Consumer Healthcare is currently generating about 0.1 per unit of risk. If you would invest 9,855 in TEXAS ROADHOUSE on September 15, 2024 and sell it today you would earn a total of 8,345 from holding TEXAS ROADHOUSE or generate 84.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.64% |
| Values | Daily Returns |
TEXAS ROADHOUSE vs. Prestige Consumer Healthcare
Performance |
| Timeline |
| TEXAS ROADHOUSE |
| Prestige Consumer |
TEXAS ROADHOUSE and Prestige Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TEXAS ROADHOUSE and Prestige Consumer
The main advantage of trading using opposite TEXAS ROADHOUSE and Prestige Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TEXAS ROADHOUSE position performs unexpectedly, Prestige Consumer 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 Prestige Consumer will offset losses from the drop in Prestige Consumer's long position.| TEXAS ROADHOUSE vs. Apple Inc | TEXAS ROADHOUSE vs. Apple Inc | TEXAS ROADHOUSE vs. Apple Inc | TEXAS ROADHOUSE vs. Apple Inc |
| Prestige Consumer vs. ITALIAN WINE BRANDS | Prestige Consumer vs. Cleanaway Waste Management | Prestige Consumer vs. ULTRA CLEAN HLDGS | Prestige Consumer vs. ATOSS SOFTWARE |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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