Correlation Between Cheesecake Factory and Chuys Holdings

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

Diversification Opportunities for Cheesecake Factory and Chuys Holdings

0.51

Correlation Coefficient

Cheesecake Factory  Chuys Holdings

Very weak diversification

The 3 months correlation between Cheesecake and Chuys is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Chuys Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chuys Holdings 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 Chuys Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chuys Holdings has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Chuys Holdings go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Chuys Holdings

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 46.07 times more return on investment than Chuys Holdings. However, Cheesecake Factory is 46.07 times more volatile than Chuys Holdings. It trades about 0.21 of its potential returns per unit of risk. Chuys Holdings is currently generating about 0.39 per unit of risk. If you would invest  3,716  in The Cheesecake Factory on September 13, 2024 and sell it today you would earn a total of  1,291  from holding The Cheesecake Factory or generate 34.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	33.33%
Values	Daily Returns

The Cheesecake Factory  vs.  Chuys Holdings

The Cheesecake Factory

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 16 (%) 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.

Chuys Holdings

Risk-Adjusted Performance

0 of 100

Strong

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

Pair Trading with Cheesecake Factory and Chuys Holdings

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

The idea behind The Cheesecake Factory and Chuys Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.