Correlation Between Adient PLC and Cheesecake Factory

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

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

Diversification Opportunities for Adient PLC and Cheesecake Factory

0.48

Correlation Coefficient

Adient PLC  Cheesecake Factory

Very weak diversification

The 3 months correlation between Adient and Cheesecake is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and The Cheesecake Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Cheesecake Factory and Adient PLC 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 Adient PLC are associated (or correlated) with Cheesecake Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Cheesecake Factory has no effect on the direction of Adient PLC i.e., Adient PLC and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Adient PLC and Cheesecake Factory

Given the investment horizon of 90 days Adient PLC is expected to under-perform the Cheesecake Factory. In addition to that, Adient PLC is 1.17 times more volatile than The Cheesecake Factory. It trades about -0.12 of its total potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.03 per unit of volatility. If you would invest  4,721  in The Cheesecake Factory on December 21, 2024 and sell it today you would earn a total of  122.00  from holding The Cheesecake Factory or generate 2.58% return on investment over 90 days.

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

Adient PLC  vs.  The Cheesecake Factory

Adient PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

The Cheesecake Factory

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Cheesecake Factory is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Adient PLC and Cheesecake Factory

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

The idea behind Adient PLC and The Cheesecake Factory 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.