Correlation Between TEXAS ROADHOUSE and UNITED RENTALS
Can any of the company-specific risk be diversified away by investing in both TEXAS ROADHOUSE and UNITED RENTALS 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 UNITED RENTALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TEXAS ROADHOUSE and UNITED RENTALS, you can compare the effects of market volatilities on TEXAS ROADHOUSE and UNITED RENTALS 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 UNITED RENTALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of TEXAS ROADHOUSE and UNITED RENTALS.
Diversification Opportunities for TEXAS ROADHOUSE and UNITED RENTALS
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between TEXAS and UNITED is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS 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 UNITED RENTALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED RENTALS has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and UNITED RENTALS go up and down completely randomly.
Pair Corralation between TEXAS ROADHOUSE and UNITED RENTALS
Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to generate 0.86 times more return on investment than UNITED RENTALS. However, TEXAS ROADHOUSE is 1.16 times less risky than UNITED RENTALS. It trades about 0.06 of its potential returns per unit of risk. UNITED RENTALS is currently generating about 0.05 per unit of risk. If you would invest 15,511 in TEXAS ROADHOUSE on October 25, 2024 and sell it today you would earn a total of 2,009 from holding TEXAS ROADHOUSE or generate 12.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TEXAS ROADHOUSE vs. UNITED RENTALS
Performance |
| Timeline |
| TEXAS ROADHOUSE |
| UNITED RENTALS |
TEXAS ROADHOUSE and UNITED RENTALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TEXAS ROADHOUSE and UNITED RENTALS
The main advantage of trading using opposite TEXAS ROADHOUSE and UNITED RENTALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TEXAS ROADHOUSE position performs unexpectedly, UNITED RENTALS 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 UNITED RENTALS will offset losses from the drop in UNITED RENTALS's long position.| TEXAS ROADHOUSE vs. Apple Inc | TEXAS ROADHOUSE vs. Apple Inc | TEXAS ROADHOUSE vs. Apple Inc | TEXAS ROADHOUSE vs. Apple Inc |
| UNITED RENTALS vs. Apple Inc | UNITED RENTALS vs. Apple Inc | UNITED RENTALS vs. Apple Inc | UNITED RENTALS vs. Apple Inc |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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