Correlation Between Texas Roadhouse and Wingstop
Can any of the company-specific risk be diversified away by investing in both Texas Roadhouse and Wingstop 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 Wingstop into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Texas Roadhouse and Wingstop, you can compare the effects of market volatilities on Texas Roadhouse and Wingstop 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 Wingstop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Roadhouse and Wingstop.
Diversification Opportunities for Texas Roadhouse and Wingstop
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Texas and Wingstop is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop 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 Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Wingstop go up and down completely randomly.
Pair Corralation between Texas Roadhouse and Wingstop
Given the investment horizon of 90 days Texas Roadhouse is expected to generate 0.59 times more return on investment than Wingstop. However, Texas Roadhouse is 1.68 times less risky than Wingstop. It trades about 0.15 of its potential returns per unit of risk. Wingstop is currently generating about 0.07 per unit of risk. If you would invest 11,265 in Texas Roadhouse on August 27, 2024 and sell it today you would earn a total of 8,225 from holding Texas Roadhouse or generate 73.01% 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. Wingstop
Performance |
| Timeline |
| Texas Roadhouse |
| Wingstop |
Texas Roadhouse and Wingstop Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Roadhouse and Wingstop
The main advantage of trading using opposite Texas Roadhouse and Wingstop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Roadhouse position performs unexpectedly, Wingstop 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 Wingstop will offset losses from the drop in Wingstop's long position.| Texas Roadhouse vs. Brinker International | Texas Roadhouse vs. BJs Restaurants | Texas Roadhouse vs. Papa Johns International | Texas Roadhouse vs. Bloomin Brands |
| Wingstop vs. Papa Johns International | Wingstop vs. Chipotle Mexican Grill | Wingstop vs. The Wendys Co | Wingstop vs. Dominos Pizza |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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