Correlation Between Cheesecake Factory and Jiangsu Expressway

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

Diversification Opportunities for Cheesecake Factory and Jiangsu Expressway

0.06

Correlation Coefficient

Cheesecake Factory  Jiangsu Expressway

Significant diversification

The 3 months correlation between Cheesecake and Jiangsu is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Jiangsu Expressway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway 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 Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Jiangsu Expressway go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Jiangsu Expressway

Given the investment horizon of 90 days The Cheesecake Factory is expected to under-perform the Jiangsu Expressway. But the stock apears to be less risky and, when comparing its historical volatility, The Cheesecake Factory is 1.54 times less risky than Jiangsu Expressway. The stock trades about -0.17 of its potential returns per unit of risk. The Jiangsu Expressway Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,984  in Jiangsu Expressway Co on October 5, 2024 and sell it today you would earn a total of  266.00  from holding Jiangsu Expressway Co or generate 13.41% return on investment over 90 days.

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

The Cheesecake Factory  vs.  Jiangsu Expressway Co

The Cheesecake Factory

Risk-Adjusted Performance

9 of 100

Modest

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.

Jiangsu Expressway

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Expressway Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Jiangsu Expressway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cheesecake Factory and Jiangsu Expressway

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

The idea behind The Cheesecake Factory and Jiangsu Expressway Co 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 Global Correlations module to find global opportunities by holding instruments from different markets.