Correlation Between Texas Roadhouse and Tesco PLC
Can any of the company-specific risk be diversified away by investing in both Texas Roadhouse and Tesco PLC 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 Tesco PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Texas Roadhouse and Tesco PLC, you can compare the effects of market volatilities on Texas Roadhouse and Tesco PLC 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 Tesco PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Roadhouse and Tesco PLC.
Diversification Opportunities for Texas Roadhouse and Tesco PLC
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Texas and Tesco is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Tesco PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesco PLC 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 Tesco PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesco PLC has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Tesco PLC go up and down completely randomly.
Pair Corralation between Texas Roadhouse and Tesco PLC
Given the investment horizon of 90 days Texas Roadhouse is expected to generate 0.72 times more return on investment than Tesco PLC. However, Texas Roadhouse is 1.39 times less risky than Tesco PLC. It trades about 0.22 of its potential returns per unit of risk. Tesco PLC is currently generating about -0.07 per unit of risk. If you would invest 18,811 in Texas Roadhouse on August 28, 2024 and sell it today you would earn a total of 1,660 from holding Texas Roadhouse or generate 8.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Texas Roadhouse vs. Tesco PLC
Performance |
| Timeline |
| Texas Roadhouse |
| Tesco PLC |
Texas Roadhouse and Tesco PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Roadhouse and Tesco PLC
The main advantage of trading using opposite Texas Roadhouse and Tesco PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Roadhouse position performs unexpectedly, Tesco PLC 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 Tesco PLC will offset losses from the drop in Tesco PLC's long position.| Texas Roadhouse vs. Brinker International | Texas Roadhouse vs. BJs Restaurants | Texas Roadhouse vs. Papa Johns International | Texas Roadhouse vs. Bloomin Brands |
| Tesco PLC vs. Ocado Group PLC | Tesco PLC vs. Carrefour SA PK | Tesco PLC vs. J Sainsbury PLC | Tesco PLC vs. Tesco 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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