Correlation Between Cheesecake Factory and KeyCorp

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

Diversification Opportunities for Cheesecake Factory and KeyCorp

-0.24

Correlation Coefficient

Cheesecake Factory  KeyCorp

Very good diversification

The 3 months correlation between Cheesecake and KeyCorp is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding The Cheesecake Factory and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Cheesecake Factory i.e., Cheesecake Factory and KeyCorp go up and down completely randomly.

Pair Corralation between Cheesecake Factory and KeyCorp

Given the investment horizon of 90 days The Cheesecake Factory is expected to generate 1.02 times more return on investment than KeyCorp. However, Cheesecake Factory is 1.02 times more volatile than KeyCorp. It trades about 0.04 of its potential returns per unit of risk. KeyCorp is currently generating about 0.02 per unit of risk. If you would invest  3,716  in The Cheesecake Factory on October 25, 2024 and sell it today you would earn a total of  1,389  from holding The Cheesecake Factory or generate 37.38% 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.  KeyCorp

The Cheesecake Factory

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 11 (%) 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.

KeyCorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, KeyCorp is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Cheesecake Factory and KeyCorp

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

The idea behind The Cheesecake Factory and KeyCorp 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.