Correlation Between Cheesecake Factory and Cardinal Health

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

Diversification Opportunities for Cheesecake Factory and Cardinal Health

0.26

Correlation Coefficient

Cheesecake Factory  Cardinal Health

Modest diversification

The 3 months correlation between Cheesecake and Cardinal is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Cardinal Health go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Cardinal Health

Given the investment horizon of 90 days Cheesecake Factory is expected to generate 2.2 times less return on investment than Cardinal Health. In addition to that, Cheesecake Factory is 2.14 times more volatile than Cardinal Health. It trades about 0.05 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.22 per unit of volatility. If you would invest  11,742  in Cardinal Health on December 30, 2024 and sell it today you would earn a total of  1,902  from holding Cardinal Health or generate 16.2% return on investment over 90 days.

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

The Cheesecake Factory  vs.  Cardinal Health

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.

Cardinal Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Cardinal Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheesecake Factory and Cardinal Health

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

The idea behind The Cheesecake Factory and Cardinal Health 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.