Correlation Between Bloomin Brands and Cheesecake Factory

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

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

Diversification Opportunities for Bloomin Brands and Cheesecake Factory

0.44

Correlation Coefficient

Bloomin Brands  Cheesecake Factory

Very weak diversification

The 3 months correlation between Bloomin and Cheesecake is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bloomin Brands 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 Bloomin Brands 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 Bloomin Brands 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 Bloomin Brands i.e., Bloomin Brands and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Bloomin Brands and Cheesecake Factory

Given the investment horizon of 90 days Bloomin Brands is expected to under-perform the Cheesecake Factory. In addition to that, Bloomin Brands is 1.88 times more volatile than The Cheesecake Factory. It trades about -0.15 of its total potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.05 per unit of volatility. If you would invest  4,712  in The Cheesecake Factory on December 30, 2024 and sell it today you would earn a total of  256.00  from holding The Cheesecake Factory or generate 5.43% return on investment over 90 days.

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

Bloomin Brands  vs.  The Cheesecake Factory

Bloomin Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

The Cheesecake Factory

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Cheesecake Factory may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bloomin Brands and Cheesecake Factory

The main advantage of trading using opposite Bloomin Brands and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bloomin Brands 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 Bloomin Brands 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .