Correlation Between Cheesecake Factory and ECD Automotive

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

Diversification Opportunities for Cheesecake Factory and ECD Automotive

CheesecakeECDDiversified AwayCheesecakeECDDiversified Away100%
-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Cheesecake and ECD is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and ECD Automotive Design in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECD Automotive Design 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 ECD Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECD Automotive Design has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and ECD Automotive go up and down completely randomly.

Pair Corralation between Cheesecake Factory and ECD Automotive

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 0.35 times more return on investment than ECD Automotive. However, The Cheesecake Factory is 2.87 times less risky than ECD Automotive. It trades about 0.05 of its potential returns per unit of risk. ECD Automotive Design is currently generating about -0.05 per unit of risk. If you would invest  3,505  in The Cheesecake Factory on November 27, 2024 and sell it today you would earn a total of  2,002  from holding The Cheesecake Factory or generate 57.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

The Cheesecake Factory  vs.  ECD Automotive Design

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-5051015
JavaScript chart by amCharts 3.21.15CAKE ECDA
       Timeline  
The Cheesecake Factory 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 7 (%) 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 March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb485052545658
ECD Automotive Design 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.80.850.90.9511.05

Cheesecake Factory and ECD Automotive Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.54-4.9-3.25-1.61-0.02731.73.445.176.9 0.020.030.040.050.060.070.080.09
JavaScript chart by amCharts 3.21.15CAKE ECDA
       Returns  

Pair Trading with Cheesecake Factory and ECD Automotive

The main advantage of trading using opposite Cheesecake Factory and ECD Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheesecake Factory position performs unexpectedly, ECD Automotive 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 ECD Automotive will offset losses from the drop in ECD Automotive's long position.
The idea behind The Cheesecake Factory and ECD Automotive Design 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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