Correlation Between Cheesecake Factory and Coupang LLC

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

Diversification Opportunities for Cheesecake Factory and Coupang LLC

-0.59

Correlation Coefficient

Cheesecake Factory  Coupang LLC

Excellent diversification

The 3 months correlation between Cheesecake and Coupang is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Coupang LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang LLC 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 Coupang LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang LLC has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Coupang LLC go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Coupang LLC

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.3 times more return on investment than Coupang LLC. However, Cheesecake Factory is 1.3 times more volatile than Coupang LLC. It trades about -0.01 of its potential returns per unit of risk. Coupang LLC is currently generating about -0.23 per unit of risk. If you would invest  5,007  in The Cheesecake Factory on October 12, 2024 and sell it today you would lose (34.00) from holding The Cheesecake Factory or give up 0.68% of portfolio value over 90 days.

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

The Cheesecake Factory  vs.  Coupang LLC

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.

Coupang LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coupang LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cheesecake Factory and Coupang LLC

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

The idea behind The Cheesecake Factory and Coupang LLC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.