Correlation Between Cheesecake Factory and China Tontine

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

Diversification Opportunities for Cheesecake Factory and China Tontine

0.0

Correlation Coefficient

Cheesecake Factory  China Tontine

Pay attention - limited upside

The 3 months correlation between Cheesecake and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and China Tontine Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Tontine Wines 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 China Tontine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Tontine Wines has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and China Tontine go up and down completely randomly.

Pair Corralation between Cheesecake Factory and China Tontine

Given the investment horizon of 90 days Cheesecake Factory is expected to generate 64.0 times less return on investment than China Tontine. But when comparing it to its historical volatility, The Cheesecake Factory is 41.88 times less risky than China Tontine. It trades about 0.06 of its potential returns per unit of risk. China Tontine Wines is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.50  in China Tontine Wines on September 19, 2024 and sell it today you would earn a total of  5.60  from holding China Tontine Wines or generate 373.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

The Cheesecake Factory  vs.  China Tontine Wines

The Cheesecake Factory

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 14 (%) 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.

China Tontine Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Tontine Wines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Tontine is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cheesecake Factory and China Tontine

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

The idea behind The Cheesecake Factory and China Tontine Wines 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.