Correlation Between Cheesecake Factory and Aspen Technology

Can any of the company-specific risk be diversified away by investing in both Cheesecake Factory and Aspen Technology 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 Aspen Technology 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 Aspen Technology, you can compare the effects of market volatilities on Cheesecake Factory and Aspen Technology 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 Aspen Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheesecake Factory and Aspen Technology.

Diversification Opportunities for Cheesecake Factory and Aspen Technology

0.9

Correlation Coefficient

Cheesecake Factory  Aspen Technology

Almost no diversification

The 3 months correlation between Cheesecake and Aspen is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Aspen Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Technology 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 Aspen Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Technology has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Aspen Technology go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Aspen Technology

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 3.25 times more return on investment than Aspen Technology. However, Cheesecake Factory is 3.25 times more volatile than Aspen Technology. It trades about 0.05 of its potential returns per unit of risk. Aspen Technology is currently generating about -0.06 per unit of risk. If you would invest  4,876  in The Cheesecake Factory on October 8, 2024 and sell it today you would earn a total of  72.00  from holding The Cheesecake Factory or generate 1.48% return on investment over 90 days.

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

The Cheesecake Factory  vs.  Aspen Technology

The Cheesecake Factory

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 12 (%) 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.

Aspen Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Aspen Technology is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cheesecake Factory and Aspen Technology

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

The idea behind The Cheesecake Factory and Aspen Technology 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.