Correlation Between Cheesecake Factory and Chesapeake Energy

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

Diversification Opportunities for Cheesecake Factory and Chesapeake Energy

-0.82

Correlation Coefficient

Cheesecake Factory  Chesapeake Energy

Pay attention - limited upside

The 3 months correlation between Cheesecake and Chesapeake is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Chesapeake Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Energy 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 Chesapeake Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Energy has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Chesapeake Energy go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Chesapeake Energy

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.01 times more return on investment than Chesapeake Energy. However, Cheesecake Factory is 1.01 times more volatile than Chesapeake Energy. It trades about 0.04 of its potential returns per unit of risk. Chesapeake Energy is currently generating about 0.0 per unit of risk. If you would invest  3,538  in The Cheesecake Factory on September 30, 2024 and sell it today you would earn a total of  1,261  from holding The Cheesecake Factory or generate 35.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	87.73%
Values	Daily Returns

The Cheesecake Factory  vs.  Chesapeake Energy

The Cheesecake Factory

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 9 (%) 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.

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Chesapeake Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cheesecake Factory and Chesapeake Energy

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

The idea behind The Cheesecake Factory and Chesapeake Energy 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.