Correlation Between Biglari Holdings and Cheesecake Factory

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

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

Diversification Opportunities for Biglari Holdings and Cheesecake Factory

0.83

Correlation Coefficient

Biglari Holdings  Cheesecake Factory

Very poor diversification

The 3 months correlation between Biglari and Cheesecake is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings 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 Biglari Holdings 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 Biglari Holdings 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 Biglari Holdings i.e., Biglari Holdings and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Biglari Holdings and Cheesecake Factory

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 1.07 times more return on investment than Cheesecake Factory. However, Biglari Holdings is 1.07 times more volatile than The Cheesecake Factory. It trades about 0.12 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.08 per unit of risk. If you would invest  18,800  in Biglari Holdings on September 25, 2024 and sell it today you would earn a total of  7,655  from holding Biglari Holdings or generate 40.72% return on investment over 90 days.

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

Biglari Holdings  vs.  The Cheesecake Factory

Biglari Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

The Cheesecake Factory

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Cheesecake Factory exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Cheesecake Factory

The main advantage of trading using opposite Biglari Holdings and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari Holdings 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 Biglari Holdings 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..