Correlation Between Texas Roadhouse and Yum Brands
Can any of the company-specific risk be diversified away by investing in both Texas Roadhouse and Yum Brands 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 Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Texas Roadhouse and Yum Brands, you can compare the effects of market volatilities on Texas Roadhouse and Yum Brands 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 Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Roadhouse and Yum Brands.
Diversification Opportunities for Texas Roadhouse and Yum Brands
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Texas and Yum is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands 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 Yum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum Brands has no effect on the direction of Texas Roadhouse i.e., Texas Roadhouse and Yum Brands go up and down completely randomly.
Pair Corralation between Texas Roadhouse and Yum Brands
Given the investment horizon of 90 days Texas Roadhouse is expected to generate 1.3 times more return on investment than Yum Brands. However, Texas Roadhouse is 1.3 times more volatile than Yum Brands. It trades about 0.08 of its potential returns per unit of risk. Yum Brands is currently generating about 0.04 per unit of risk. If you would invest 10,033 in Texas Roadhouse on January 10, 2025 and sell it today you would earn a total of 6,138 from holding Texas Roadhouse or generate 61.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Texas Roadhouse vs. Yum Brands
Performance |
| Timeline |
| Texas Roadhouse |
| Yum Brands |
Texas Roadhouse and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Roadhouse and Yum Brands
The main advantage of trading using opposite Texas Roadhouse and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Roadhouse position performs unexpectedly, Yum Brands 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 Yum Brands will offset losses from the drop in Yum Brands' long position.| Texas Roadhouse vs. Brinker International | Texas Roadhouse vs. BJs Restaurants | Texas Roadhouse vs. Papa Johns International | Texas Roadhouse vs. Bloomin Brands |
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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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