Correlation Between Cheesecake Factory and Jabil Circuit

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

Diversification Opportunities for Cheesecake Factory and Jabil Circuit

0.88

Correlation Coefficient

Cheesecake Factory  Jabil Circuit

Very poor diversification

The 3 months correlation between Cheesecake and Jabil is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Jabil Circuit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jabil Circuit 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 Jabil Circuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jabil Circuit has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Jabil Circuit go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Jabil Circuit

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.14 times more return on investment than Jabil Circuit. However, Cheesecake Factory is 1.14 times more volatile than Jabil Circuit. It trades about 0.2 of its potential returns per unit of risk. Jabil Circuit is currently generating about 0.19 per unit of risk. If you would invest  3,737  in The Cheesecake Factory on September 14, 2024 and sell it today you would earn a total of  1,259  from holding The Cheesecake Factory or generate 33.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

The Cheesecake Factory  vs.  Jabil Circuit

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.

Jabil Circuit

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jabil Circuit are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, Jabil Circuit disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheesecake Factory and Jabil Circuit

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

The idea behind The Cheesecake Factory and Jabil Circuit 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.