Correlation Between Cheesecake Factory and Brookfield Renewable

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

Diversification Opportunities for Cheesecake Factory and Brookfield Renewable

0.86

Correlation Coefficient

Cheesecake Factory  Brookfield Renewable

Very poor diversification

The 3 months correlation between Cheesecake and Brookfield is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Brookfield Renewable Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable 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 Brookfield Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Renewable has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Brookfield Renewable go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Brookfield Renewable

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 3.69 times more return on investment than Brookfield Renewable. However, Cheesecake Factory is 3.69 times more volatile than Brookfield Renewable Partners. It trades about 0.19 of its potential returns per unit of risk. Brookfield Renewable Partners is currently generating about 0.1 per unit of risk. If you would invest  3,871  in The Cheesecake Factory on September 3, 2024 and sell it today you would earn a total of  1,193  from holding The Cheesecake Factory or generate 30.82% return on investment over 90 days.

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

The Cheesecake Factory  vs.  Brookfield Renewable Partners

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.

Brookfield Renewable

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Brookfield Renewable is not utilizing all of its potentials. The newest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Cheesecake Factory and Brookfield Renewable

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

The idea behind The Cheesecake Factory and Brookfield Renewable Partners 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 Global Correlations module to find global opportunities by holding instruments from different markets.