Correlation Between Texas Roadhouse and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Texas Roadhouse and Hanover Insurance 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 Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Texas Roadhouse and The Hanover Insurance, you can compare the effects of market volatilities on Texas Roadhouse and Hanover Insurance 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 Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Roadhouse and Hanover Insurance.
Diversification Opportunities for Texas Roadhouse and Hanover Insurance
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Texas and Hanover is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance 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 Hanover Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Insurance has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Hanover Insurance go up and down completely randomly.
Pair Corralation between Texas Roadhouse and Hanover Insurance
Assuming the 90 days horizon Texas Roadhouse is expected to generate 1.4 times less return on investment than Hanover Insurance. In addition to that, Texas Roadhouse is 1.23 times more volatile than The Hanover Insurance. It trades about 0.21 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.37 per unit of volatility. If you would invest 13,600 in The Hanover Insurance on August 29, 2024 and sell it today you would earn a total of 1,900 from holding The Hanover Insurance or generate 13.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Texas Roadhouse vs. The Hanover Insurance
Performance |
| Timeline |
| Texas Roadhouse |
| Hanover Insurance |
Texas Roadhouse and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Roadhouse and Hanover Insurance
The main advantage of trading using opposite Texas Roadhouse and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Roadhouse position performs unexpectedly, Hanover Insurance 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 Hanover Insurance will offset losses from the drop in Hanover Insurance's long position.| Texas Roadhouse vs. Austevoll Seafood ASA | Texas Roadhouse vs. American Eagle Outfitters | Texas Roadhouse vs. Marie Brizard Wine | Texas Roadhouse vs. Astral Foods Limited |
| Hanover Insurance vs. Tokio Marine Holdings | Hanover Insurance vs. The Peoples Insurance | Hanover Insurance vs. Beazley PLC |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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