Correlation Between Cheesecake Factory and Kid Castle

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

Diversification Opportunities for Cheesecake Factory and Kid Castle

-0.29

Correlation Coefficient

Cheesecake Factory  Kid Castle

Very good diversification

The 3 months correlation between Cheesecake and Kid is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and Kid Castle Educational in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kid Castle Educational 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 Kid Castle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kid Castle Educational has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and Kid Castle go up and down completely randomly.

Pair Corralation between Cheesecake Factory and Kid Castle

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 0.2 times more return on investment than Kid Castle. However, The Cheesecake Factory is 4.92 times less risky than Kid Castle. It trades about 0.2 of its potential returns per unit of risk. Kid Castle Educational is currently generating about -0.12 per unit of risk. If you would invest  3,737  in The Cheesecake Factory on September 15, 2024 and sell it today you would earn a total of  1,250  from holding The Cheesecake Factory or generate 33.45% return on investment over 90 days.

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

The Cheesecake Factory  vs.  Kid Castle Educational

The Cheesecake Factory

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 15 (%) 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.

Kid Castle Educational

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kid Castle Educational has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cheesecake Factory and Kid Castle

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

The idea behind The Cheesecake Factory and Kid Castle Educational 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.