Correlation Between NETGEAR and Texas Roadhouse

Can any of the company-specific risk be diversified away by investing in both NETGEAR and Texas Roadhouse 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 NETGEAR and Texas Roadhouse into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NETGEAR and Texas Roadhouse, you can compare the effects of market volatilities on NETGEAR and Texas Roadhouse 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 NETGEAR with a short position of Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and Texas Roadhouse.

Diversification Opportunities for NETGEAR and Texas Roadhouse

0.06

Correlation Coefficient

NETGEAR  Texas Roadhouse

Significant diversification

The 3 months correlation between NETGEAR and Texas is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse and NETGEAR 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 NETGEAR are associated (or correlated) with Texas Roadhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Roadhouse has no effect on the direction of NETGEAR i.e., NETGEAR and Texas Roadhouse go up and down completely randomly.

Pair Corralation between NETGEAR and Texas Roadhouse

Given the investment horizon of 90 days NETGEAR is expected to under-perform the Texas Roadhouse. In addition to that, NETGEAR is 1.83 times more volatile than Texas Roadhouse. It trades about -0.04 of its total potential returns per unit of risk. Texas Roadhouse is currently generating about 0.01 per unit of volatility. If you would invest  16,603  in Texas Roadhouse on September 12, 2025 and sell it today you would earn a total of  18.00  from holding Texas Roadhouse or generate 0.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NETGEAR  vs.  Texas Roadhouse

NETGEAR

Risk-Adjusted Performance

Weakest

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Texas Roadhouse

Risk-Adjusted Performance

Weakest

Over the last 90 days Texas Roadhouse has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Texas Roadhouse is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NETGEAR and Texas Roadhouse

The main advantage of trading using opposite NETGEAR and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR position performs unexpectedly, Texas Roadhouse 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 Texas Roadhouse will offset losses from the drop in Texas Roadhouse's long position.

The idea behind NETGEAR and Texas Roadhouse pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.