Correlation Between Cheesecake Factory and Montana Technologies

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

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

Diversification Opportunities for Cheesecake Factory and Montana Technologies

0.68

Correlation Coefficient

Cheesecake Factory  Montana Technologies

Poor diversification

The 3 months correlation between Cheesecake and Montana is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Montana Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montana Technologies and Cheesecake Factory 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 The Cheesecake Factory are associated (or correlated) with Montana Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montana Technologies has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Montana Technologies go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Montana Technologies

Given the investment horizon of 90 days Cheesecake Factory is expected to generate 2.19 times less return on investment than Montana Technologies. But when comparing it to its historical volatility, The Cheesecake Factory is 3.53 times less risky than Montana Technologies. It trades about 0.09 of its potential returns per unit of risk. Montana Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  858.00  in Montana Technologies on October 10, 2024 and sell it today you would earn a total of  28.00  from holding Montana Technologies or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

The Cheesecake Factory  vs.  Montana Technologies

The Cheesecake Factory

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 15 (%) 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.

Montana Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Montana Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Montana Technologies revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheesecake Factory and Montana Technologies

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

The idea behind The Cheesecake Factory and Montana Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.